Zoocasa
Sold Prices
Mortgage Calculator
Map
Market Insights
  • Blog Home
  • For Buyers
  • For Sellers
  • Real Estate News
  • Mortgage News in Canada
  • Free Guides (PDF)
  • Real Estate Infographics
Zoocasa
  • Blog Home
  • For Buyers
  • For Sellers
  • Real Estate News
  • Mortgage News in Canada
  • Free Guides (PDF)
  • Real Estate Infographics
Home Ask the Pros

Mortgage Lending Rules

Mike Bricknell by Mike Bricknell
September 27, 2016
in Ask the Pros, Mortgage News
Reading Time: 3 mins read
New Mortgage Lending Rules to come.
Share15
Tweet
Share6
21 Shares

Buying a home in the Greater Toronto Area is easier said than done, as the availability of homes for sale is shrinking – but making a home purchase sooner rather than later will be in your best interest, as new mortgages rules are on the way.

A recent announcement from Canada’s financial regulator, the Office of the Superintendent of Financial Institutions (OSFI), reveals banks and lenders who offer mortgage financing will soon face stricter regulations. That ultimately means tougher lending rules for you – the homebuyer.

Related Read: Banks are Worried About Home Prices in Toronto and Vancouver

Reigning in Debt Risk

The increasingly hot housing market (what an understatement!) has prompted lenders to be more cautious with underwriting processes, and to implement higher standards when originating insured mortgages. Mortgages require insurance when less than a 20% down payment is made; a high-ratio insurance premium is added on top of the monthly mortgage principal and interest payments over its term. This is a way to keep housing prices, and unsustainable debt levels, in check.

What is OSFI Planning?

OSFI, an independent agency of the Government of Canada, supervises and regulates financial companies. It has been meeting with the banking sector to create these new guidelines, which will not only impact home buyers in the Toronto and Vancouver housing market, but all buyers across Canada.

The purpose of these new regulations is to place more responsibility on banks to make better lending decisions, for fear that Canada’s housing market is overvalued in some cities. OFSI wants to avoid Canadian borrowers becoming overextended in the event of a potential price correction and real estate market downturn. You see, despite the general view that the banks and government don’t care about the average citizen, this shows they actually do care about our general well-being – but at a cost.

Higher Capital Requirements to Come

In these meetings, which have been going on for at least the past six months, federal Finance Minister Bill Morneau, Crown Corporation mortgage insurer Canada Mortgage and Housing Corporation (CMHC) and OSFI have been discussing the possibility of lenders holding on to more capital from residential mortgages. This would better protect them against defaults – folks who are unable to maintain their mortgage payments, and fall behind on servicing their debt. While no one wants to be in such a position, sometimes life throws in an unexpected curveball such as sudden illness, marital split, pregnancy or a death – factors we can all relate to.

The Challenges of Hanging onto Cash

However, holding onto more money will create additional costs for the banks, as they must now offset the interest that would normally be collected on money lent out in mortgages. Of course, those extra costs will be passed down to you – the borrower.

As well, the possibility of increased mortgage rates or stricter lending guidelines could make it even tougher to be approved for a mortgage in the future. We are starting to see lenders asking for more documentation at mortgage origination as it is – tougher rules will also reduce the amount of mortgage you can apply for. It could mean living in your parents’ basement for longer if you don’t act soon!

Speak Your Mind

Not a fan of higher mortgage rates or tougher lending rules? You have the opportunity to make your voice heard until October 18 by submitting your comments to OSFI.

Some lenders will begin to phase the new rules in by October 31, with stricter rules to come November 1, and to be fully in-force by January 1, 2017. More changes are expected to come in the new year – stay tuned as we break down what they’ll mean for your homebuying experience.

Previous Post

Is a Toronto Foreign Investment Tax a Possibility?

Next Post

Should You Ever Buy a Home Sight Unseen?

Mike Bricknell

Mike Bricknell

Mike is a Mortgage Agent with Canwise Financial and has been working in the mortgage industry since late 2008. Mike does his best to stay updated with the latest mortgage related news, and passes along sound advice to his centres of influence to build better, long lasting business relationships. Contact Mike today to serve your mortgage lending needs at [email protected] .

Related Posts

A group of friends sitting on the beach.
Advice

10 Things to Do in Pensacola That Turn Visitors Into Homeowners 

May 19, 2025
Two people sitting on a hammock together.
Advice

Discover Moncton: Top Things to Do in New Brunswick’s Vibrant City

May 18, 2025
A couple talking with a mortgage professional.
Bank of Canada

The First BoC Rate Hold of 2025: What it Means for Market Momentum 

April 16, 2025

Blog Search

No Result
View All Result

Newsletter Sign-up

Join a community of 130,000+ subscribers. Don't miss important real estate news, market data, and buying and selling tips.

Recent Articles

Regina Restaurants: A Curated Guide to the Best Eats in the Queen City

May 24, 2025

Gardeners’ Paradise: 7 Dream Homes Where Green Thumbs Thrive

May 23, 2025
A yellow house by the water, next to a wooden dock, surrounded by a serene landscape.

7 Small Towns in Newfoundland That Are Stealing the Spotlight from Big Cities

May 22, 2025
young family playing soccer with child

The City of Red Deer is Calling, a 90-Minute Drive from the Rush

May 22, 2025

Featured Listings

Gardeners’ Paradise: 7 Dream Homes Where Green Thumbs Thrive

May 23, 2025

Dream Homes with Breathtaking Views in the U.S.

February 11, 2025
A family looking at a house.

Deals of the Month: Ontario Homes with Recent Price Reductions

November 12, 2024

Slopeside Living: 9 Ontario Homes Near Ski Hills and Resorts

October 11, 2024
first-time home buyer programs and rebates

Social Media

250 The Esplanade Suite 408 Toronto, ON M5A 4J5

Stay Connected

  • Blog Home
  • For Buyers
  • For Sellers
  • Real Estate News
  • Mortgage News in Canada
  • Free Guides (PDF)
  • Real Estate Infographics
No Result
View All Result

Zoocasa © 2007–2022. The trademarks MLS®, Multiple Listing Service® and the associated logos are owned by The Canadian Real Estate Association (CREA) and identify the quality of services provided by real estate professionals who are members of CREA.