Stay Ahead of the Game with the Latest Proposed Mortgage Rules

As a private mortgage lender, it’s essential to stay up-to-date with the latest industry changes and regulations. That’s why we’re here to share the latest news on the proposed mortgage rules from the Office of the Superintendent of Financial Institutions (OSFI).

OSFI has announced proposals to help mitigate Canada’s residential mortgage market, as unprecedented house price increases have been accompanied by record levels of household debt. The proposed rules include:

  1. Loan-to-income (LTI) and debt-to-income (DTI) restrictions
  2. Debt service coverage restrictions
  3. Interest rate affordability stress test

Loan-to-income (LTI) and debt-to-income (DTI) restrictions would restrict mortgage debt or total debt as a percentage of borrower income. OSFI is proposing a “lender-level” limit that would restrict mortgage providers to a certain volume of loans that exceed their “prudent” threshold.

Debt service coverage restrictions would involve measures that restrict ongoing debt service obligations as a percentage of borrower income. Currently, most lenders follow Gross Debt Service (GDS) and Total Debt Service (TDS) limits on insured mortgages, which are 39% and 44% respectively. OSFI could limit lenders to a certain volume of loans with high debt-service ratios.

Interest rate affordability stress tests are aimed at ensuring borrowers are in good shape and will remain so in the future. The proposed changes are under consultation until April 14, 2023.

Despite these proposed changes, the bond yield has recently dropped to its lowest level in 6 months, indicating that fixed rates will continue to decline, which could boost real estate sales.

As a private mortgage lender, it’s important to keep abreast of these changes and consider how they may impact your lending business. We’re here to help, and our team is always available to answer any questions you may have.

Stay ahead of the game and stay informed with the latest proposed mortgage rules.