NEW MORTGAGE RULES
Effective January 1st, 2018
Canada’s banking regulator is setting a new minimum qualifying rate, or “stress test,” for ALL mortgages.
WHO DOES THIS AFFECT?
This will affect ALL mortgage consumers (i.e. insured, insurable, or uninsured mortgages).
WHAT IS THE NEW RULE CHANGE?
Notably, uninsured borrowers currently qualify for a mortgage at a 5-year fixed rate (the actual contract rate) for as low as 3.14% but in a few months, this will dramatically change to almost 5% or more. Effective January 1st, ALL applications will need to be stress tested using the greater of either the benchmark rate (presently 4.99%) OR the contract rate plus 2% (i.e. a contract rate of 3.14% + 2% = 5.14% to qualify). The effect of this change will result in a 20% decrease in affordability; you could need upwards of 20% more income to get the same mortgage that you could get today under the old rules. This applies to purchases and refinances (but does NOT apply to renewals).
Find out more here.
Thank you to Janet MacDonald for this info.
Kingston Mortgage Solutions