According to the Office of the Superintendent of Financial Institutions (OSFI), tougher mortgage qualifying rules will take effect as soon as January 2018.
Why is this so important?
If you barely qualify for a mortgage now, you won’t in a couple of months.
The new OSFI minimum qualifying rate, also known as the “stress test”, will be a requirement for all home buyers requiring a mortgage. Presently, prospective home buyers with down payments of 20% or greater are not required to purchase mortgage insurance, and therefore forgo any preliminary testing.
"Come January, new home buyers who fall under the uninsured borrower umbrella will submit to the same assessment as insured borrowers, with the qualifying rate ensuring that new mortgages, regardless of the down payment size, will be able to pay the loan if interest rates become higher than they are today. Meaning that, borrowers will be tested at either greater than the five-year benchmark rate, or two percent higher than their actual mortgage rate- whichever one is higher." (Condonow.com)
This equivalent of a 2% rate hike will equate to a drop of approximately 15-20% in purchasing power.
By the new year, some potential mortgagees may no longer be able to afford buying real estate.
Here is an example of how the numbers tally up now, versus just about two months from now.
OCTOBER 2017 Vs. JANUARY 2018
Example: Buyer’s mortgage rate is lower than the bank of Canada’s five-year benchmark rate
Current Bank of Canada Benchmark: 4.89%
Annual Income: $100,000
Down Payment: 20%
5 Year Fixed Mortgage Rate of 3.09%
Amortized over 25 Years
October 2017 maximum affordability: $706,692
January 2017 maximum affordability: $559,896
Click here to find out how the new mortgage rules will affect homebuyers in 2018.
Contact me when you need more information and
I will be happy to help you in your decision making.
Sutton Group Realty Systems Inc., Brokerage
Cell: (416) 803-4224 Office: (416) 762-4200