New Mortgage Rule Changes Could Be Devastating to Nova Scotia

The federal government is considering implementing additional mortgage tightening rules that could have a devastating impact on uninsured mortgage applicants. The proposal would require lower-risk borrowers to be approved at two percent above the rate offered to them by their lender (i.e. if the contract rate offered is 3%, lower-risk borrowers would have to qualify at 5%). This measure would shut many consumers out of the market, drive them into less suitable housing or entice them to visit sub-prime lenders that are not federally regulated. Although additional policy changes like these are intended to cool hot markets with over inflated housing prices, there could be stagnating effects for business in regions, like Nova Scotia, where cooling measures are not needed.

All Canadians should have access to housing that meets their needs and that they can afford. Unfortunately, the proposal would require lower-risk borrowers to be approved at two percent above the rate offered to them by their lender. This measure would shut many consumers out of the market, drive them into less suitable housing or entice them to visit sub-prime lenders that are not federally regulated. When combined with the seven different finance tightening measures introduced in the last eight years, home ownership is slipping out of reach for many first-time home buyers. 

The new proposed stress test would reduce buying power by roughly 18% for prime borrowers, home buyers who have a 20% or more down payment. In addition, qualifying rates for non-prime borrowers would rocket into the 6 to 7% range, an extremely high rate for young buyers. OSFI's proposal does not eliminate the system of lower quality borrowers, it simply heightens overall economic risk as Canadians will continue to buy or refinance despite tighter regulations.

Further rate or policy changes could cause distress in various housing markets, causing significant damage to the economy. OSFI's proposal is especially dangerous given recent interest rate increases and the potential for further increases. Extending the stress test to uninsured mortgages is unnecessary, imprudent and risks damaging the Canadian economy

The Canadian Real Estate Association is asking all members to reject this recommendation. Assist 2 Sell is writing to our representatives to ensure that homeowners in Nova Scotia are protected from these changes.  If you have any questions just give us a call at 902 446-3113.

Download a PDF of B-20 Draft Here

Source  Government of Canada Office of the Superintendent of Financial Institutions  OSFI  http://www.osfi-bsif.gc.ca/Eng/fi-if/rg-ro/gdn-ort/gl-ld/Pages/b20_dft.aspx