Mortgage Qualification Changes
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Mortgage Qualification Changes
Finance Minister Bill Morneau had announced on Monday October 3, 2016 sweeping changes aimed at ensuring Canadians aren’t taking on bigger mortgages than they can afford in an era of historically low interest rates.
Effective October 17 2016 the change regarding mortgage qualifying, described as "Mortgage rate stress test for all insured borrowers”, means that for insured mortgages (down-payments under 20%), lenders will now have to use the Bank of Canada benchmark rate of 4.64% to qualify clients, regardless of the rate or term they are taking. Up until now buyers taking a fixed rate on a 5-year or longer term were able to qualify on the actual fixed rate they were offered (which is currently in the range of 2.44% or lower). Going forward at 4.64% one can easily see the huge impact on the mortgage amount available to high-ratio buyers – it will be in the range of a 20% or more reduction in maximum mortgage amount.
These new mortgage qualifying changes will also push more business away from Mono-line Lenders into the arms of the Big-6 Banks, primarily because the Mono-line lenders are required to insure their mortgages because they have to sell them to investors, while the Big-6 Banks can carry those mortgages on their balance sheet.
Jencor has been busy contacting our clients and referral partners to advise those who will be affected by this change. Please feel free to contact one off our Mortgage Advisor's today to review your options.