(905) 545-1188   


Posted: September 5, 2017

The Government is currently considering a further change to the mortgage industry. Lenders will be required to add 200 basis points to the contract rate when qualifying a mortgage. This rule is currently in place for Canadians with less than 20% down, but the new rule will be extended to all levels of downpayment. We saw a large increase in Mom and Dad involvement with the first change, through downpayment assistance and co-signing. The new change will make their assistance null and void and will place a good percentage of 1st time Canadians on the sideline. Excerpt Below Shared by BuzzBuzz Home A former MP and popular finance blogger is warning a federal watchdog’s proposed changes to the mortgage qualification process could have a dire impact on housing markets across Canada. Garth Turner, whose Greater Fool blog has ruffled more than a few feathers, suggests a move to “stress test” all uninsured mortgages, rather than just insured mortgages with downpayments of less than 20%, will curb demand considerably. “It’s been seven years since we’ve had consistently rising interest rates and we’ve never had this kind of stress test before,” Turner tells BuzzBuzzNews. “I just can’t in honesty tell people, that ‘Oh, you know, go to Cambridge or Montreal or Halifax or Edmonton for a bargain property because I think properties are going to be feeling a downward tug,” he continues. Last month, the Office of the Superintendent of Financial Institutions published a draft of its reworked Guide B-20 — Residential Mortgage Underwriting Practices and Procedures, which included the broader stress test proposal. By stress testing all mortgages, Turner suggests a large chunk of the prospective-homebuyer population will be pushed to the sidelines as they will no longer be able to finance their purchase, thus reducing demand and, ultimately, leading to outright price declines. It’s a regulatory change that Turner is convinced will take place before the end of the year. “We all have the same mortgage rates coast to coast, we all have the same mortgage approval regulations coast to coast, so these are universal changes that are going to affect every buyer in Canada,” Turner says. Currently, a homebuyer can go to an alternative or subprime lender or even the Bank of Mom and Dad to borrow money to boost their downpayment to 20% or more, avoiding any stress test. But the new regulations would close this loophole. “Credit is going to be drying up somewhere between 17 and 20% simply because of the stress test alone, and that’s a pretty significant number of people to take out of the market,” he adds. “The only workaround is going to be the people who get mortgages from non-bank lenders,” says Turner, citing provincially mandated credit unions as an example.