Frustration and disappointment are often words that come to me when I hear the Office of the Superintendent of Financial Institutions (OSFI) making recommendations to the Federal Government about tightening the Canadian lending guidelines. The recommendation will be presented on May 24, 2021, to be put in place effective June 1, 2021.
The new proposal for the qualifying rate for uninsured mortgages is the higher of the mortgage contract rate plus 2% or 5.25% as a minimum floor. Insured mortgages are already at a higher qualifying rate. What does this mean to you? If you have more than 20% down, your purchasing power is going to drop – likely between 30K and 60K. In addition, high ratio mortgages, which already have a qualifying rate buffer, may be affected because banks and finance companies will have a hard time programming their systems to differentiate between a high ratio mortgage and a conventional mortgage, at least for the first few months.
If you have been preapproved, reach out to your bank or mortgage broker to find out what you will qualify for after the June 1st qualification changes. If you are currently in the middle of negotiations, get everything wrapped up before the end of May.