OSFI Mortgage rules changes and impact

On April 8th, 2021, the Office of the Superintendent of Financial Institutions (OSFI) proposed a tougher minimum qualifying rate for uninsured mortgages.

As proposed, it will be the higher of these: the mortgage contract rate plus 2%, OR a 5.25% floor rate.

This is 0.46%-pts higher than the current stress test qualifying rate of 4.79%. 

On June 1st, 2021 (the proposed start date) should nothing change, it would be slightly harder to get approved for a specific type of mortgage. When we say slightly, the impact on purchasing power is roughly 4-5%.

What does this mean for you and are you impacted?This is only regarding uninsurable loans (see below criteria). Primarily this will impact those looking at refinancing their current mortgage or those looking at purchasing an investment property

Are you refinancing your mortgage?There are many reasons to refinance such as:

• Lower interest rate
• Access to home equity for things like renovation or debt consolidation

If you're interested in the above, the proposed changes may impact you.

Are you purchasing a rental property?If you were considering purchasing an investment property the proposed changes may impact you.

Are you buying a house with a 10% down payment?The proposed changes will NOT affect you.

Are you closing an already approved mortgage on or after June 1st?The proposed changes will not affect you.

Let’s answer some more questions you may have about this:

What is an “uninsured mortgage”?Mortgages that cannot be default insured are called uninsurable.

Uninsurable Mortgages

Apply to any of the following:

• Purchases of $1 million or more
• Refinances (e.g., when replacing your existing loan with a new loan of higher risk, like one where you’re increasing your mortgage size)
• Non-owner-occupied single-unit rental properties
• Amortizations over 25 years

What does OSFI have to say about this? OSFI is concerned about what it’s “seen in the market” and chose the higher 5.25% rate because “the system needs to be ready for a return to pre-pandemic levels.”