2018 Mortgage Rules And Changes

Mortgage Need to Knows: News and Information You Can Use

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New Rule Changes – January 1st 2018

  • On January 1st, 2018, OSFI implemented new conventional (uninsured) mortgage rules, attempting to protect homebuyers from mortgage default in a rising interest rate environment.
  • The government introduced a rate cushion, which will affect all uninsured mortgages (those with a down payment of 20% and all refinances). They must now qualify at the greater of:- The Bank of Canada posted rate (5.14%) OR
    – Their contract rate + 2% (This means, if your rate is 3.39%, you would be qualifying at 5.39%)
  • This results in approximately a 20% decrease in purchasing power
    Example: *A couple (or an individual) who has a combined income of $150,000* Maximum Purchase Price:

–  Before the Stress Test: $1,050,000
–  After the Stress Test: $840,000
–  Difference of: $210,000 

Bank Of Canada Rate Increase

  • On January 17th, 2018, the Bank of Canada increased its overnight lending rate to 1.25% from 1%.
  • The major 6 banks have followed their lead, and increased their prime rate. Each lender decides what their prime rate will be. (For example, Scotiabank’s is 3.45% but TD Bank is 3.60%)
  • Changes in Prime influence variable interest rates and lines of credit.

Insured Mortgages

  • Properties under 1 Million, with less than 20% down payment
  • Insured by one of three insurers in Canada
  • Minimum down payment is 5% on the first $500,000 and 10% on the difference up to $999,999
  • Borrower has to be qualified at the Bank of Canada posted rate (5.14%) even if their contract rate is lower

Information provided to Sotheby’s from Darlene Hanley and David Smith – ORIANA Financial – Hanley Mortgage Group (www.hanleymortgagegroup.com)

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