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OSFI Proposes A New Minimum Qualifying Rate For Uninsured Mortgages

OSFI proposes a new minimum qualifying rate for uninsured mortgages. It has not been passed yet.

Yesterday, the Office of the Superintendent of Financial Institutions (OSFI) proposed a new qualifying rate for uninsured mortgages to be the higher of the mortgage contract rate, plus 2% or 5.25% as a minimum floor which they will revisit and re-evaluate at least once a year to ensure it remains appropriate for the risks in the environment. The plan is to implement the changes on June 1, after consultations.

The current Canadian housing market conditions have the potential to put lenders at increased financial risk and so this is OFSI’s proactive action to ensure that banks will continue to be resilient and can support Canada’s post-pandemic economic recovery.

The proposed increased minimum qualifying rate will make it more difficult for homebuyers to secure financing but it ensures borrowers will have the ability to make mortgage payments in the event of a change in circumstances like a rise in mortgage interest rates or the loss or reduction of income. Based on our calculations, this proposal will decrease borrowing power by about 5%.

This proposal comes during a time where housing prices are surging and mortgage rates are low which might consequentially accelerate the market as buyers rush in before the changes are implemented in June.

If you’re planning on purchasing in the near future and want to learn more about this, please do not hesitate to reach out!

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