The Office of the Superintendent of Financial Institutions (OFSI) has published its new B20 Lending guidelines coming into effect Jan 1, 2018. Some Brief highlights of the new changes:
As expected starting Jan 1 2018 The minimum qualifying rate for uninsured mortgages will be the greater of the five-year benchmark rate published by the BoC or the contractual mortgage rate +2%. So, if the rate on the clients’ mortgage is 3%, the client must qualify to carry the mortgage at 5% or if the rate is 5%, the client must qualify at 7%. I believe this change will provide a lot of opportunity for us as many A clients will now be pushed into the B space as they will not qualify under the new guidelines and many current B clients will go into the private space.
They will be doing away with the bundling of 1st and 2nd mortgages by B lenders to increase the LTV to 85%/ (ie Home Trust Bundle programs) Not a big change as you can still go out and get a private 2nd in behind your 1st mortgage you got approved with a B lender or A lender if you need one.
We are however disappointed with the decision to implement a new stress test at a 200-basis points level. We expect this will encourage more people to take shorter term mortgages, putting more borrowers at risk should interest rates rise dramatically. We believe the new qualifying rate will have negative implications for the Canadian mortgage finance market and the national economy as a whole. Following this announcement, will continue our discussions with the Ministry of Finance and the Bank of Canada about the methodology used to set the 5-year bench mark.
AKAL Mortgages professionals understand these changes and could help you/your clients to understand how it affects YOU! contact for a free one on one meeting with AKAL Mortgage Professional by visiting www.AKALmortgages.com, 416.621.1300.