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There are two scenarios new buyers can anticipate
Today, the Office of the Superintendent of Financial Institutions (OSFI) introduced new rules on mortgage lending to take effect next year.
OSFI is setting a new minimum qualifying rate, or “stress test,” for uninsured mortgages (mortgage consumers with down payments 20% or greater than their home price).
The rules now require the minimum qualifying rate for uninsured mortgages to be the greater of the five-year benchmark rate published by the Bank of Canada (presently 4.89%) or 200 basis points above the mortgage holder’s contractual mortgage rate. “The main effect will be felt by first-time buyers,” says James Laird, co-founder of Ratehub.ca. “No matter how much money they put down as a down payment, they will have to pass the stress test.” The effect of the changes will be huge, resulting in a 20%decrease in affordability, meaning a first-time homebuyer will be able to buy 20% less house, explains Laird.
MoneySense asked Ratehub.ca to run the numbers on two likely scenarios and find out what it would mean for a family’s bottom line. Here’s what they found:
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