Office of the Superintendent of Financial Institutions Canada (OSFI)
New rules will take in effect on January 1, 2018.

Back in October of 2016, a new stress test was introduced and implemented on all insured mortgages (applicable to all applications with less 20% down payment and some special programs like self-employed borrowers). Since October, all insured mortgages have had to qualify using the Benchmark Rate of Canada’s 5-year posted rate which is currently at 4.94. This has resulted in countless borrowers not being able to qualify for sufficient mortgage amount.

Today, OSFI published the final guideline of B-20! Effective January 1st, 2018, all uninsured mortgages (all applications with 20% down payment/equity or more) will be subject to a similar stress test. A new qualifying rate will be required on all uninsured mortgages. The qualifying rate will be either the 5-year posted rate with the Bank of Canada (currently at 4.94%) OR 2% above the contract rate WHICHEVER IS HIGHER.

For example, if the actual rate on the mortgage is 3.50% today then the qualifying rate to be used will be 5.50% (2% above the contract rate). This rule will apply to all financial institutions that are federally regulated including the banks, trust companies and other mortgage lending companies.This new mortgage policy will apply to ALL applications including purchases, refinances, and renewal transfers/switches.

Historically, most lending institutions typically implement changes at least a couple of weeks prior to implementation date. Thus, we may encounter lenders implementing this new rule well prior to January 1st, 2018.

We will continue to update you on any further information as it becomes available.

Click here to go to the OSFI Website

Howard Drukarsh
Broker of Record, President, Co-Founder
Right at Home Realty Inc., Brokerage