How New Lending Rules Could Affect Your Real Estate Plans
If you’re planning on investing in real estate, you’ll be able to plan better if you’re aware of any changes in the industry. As a real estate agent that focuses on my client’s peace of mind, I am dutybound to help you understand the impact of new rules or changes in rates, so that you can benefit from it and plan better.
One of the most recent changes in lending rules introduced by the Liberal government could potentially affect many people getting ready to purchase a home. These changes will effectively make it harder for people to qualify for a mortgage, and reduce the size of mortgage they can afford. In turn, this will affect their ability to purchase a home. These new rules will particularly affect first time purchasers who are finding it increasingly difficult to get their feet into the market.
As per the new lending rules put in place by the Office of the Superintendent of Financial Institutions Canada, there is new minimum qualifying rate, or “stress test,” for uninsured mortgages. This means that that the minimum qualifying rate for uninsured mortgages is now greater than the five-year benchmark rate published by the Bank of Canada or the contractual mortgage rate +2%.
In addition, OSFI now requires lenders to enhance their loan-to-value (LTV) measurement and limits so they will be dynamic and responsive to risk and are updated as housing markets and the economic environment evolve. OSFI is also placing restrictions on certain lending arrangements that are designed or appear designed to circumvent LTV limits.
This means that a federally regulated financial institution is prohibited from arranging with another lender a mortgage, or a combination of a mortgage and other lending products, in any form that circumvents the institution’s maximum LTV ratio or other limits in its residential mortgage underwriting policy, or any requirements established by law.
These new rules which will be effective January 1, 2018, will definitely help slow down the rising real estate market. However, it will also make it more difficult for certain buyers to purchase real estate.
With changing legislation, it is always a good idea to keep your pre-approval current in case such legislation affects your buying power. If you need any help in navigating this ever-changing real estate market, get in touch with Brian Toye.
My Re/Max Garden City team has been the cornerstone of real estate in the Niagara Region for over thirty years, with service and support that is unparalleled. If you have any questions about how the new lending rules could affect your plans to purchase a home or any real estate, please contact me by clicking here.