The Office of The Superintendent of Financial Institutions (OSFI) has proposed drastic changes to Federally Regulated Financial Institutions (eg. Banks) in HOW they qualify their clients mortgage applications begining in January 2018.
New applications with more than 20% down payment will need to be STRESS TESTED to the posted 5 year offered rate PLUS 200 (2%) points above. Even though an applicant may have strong assets and a healthy down payment, major financial institutions will now have to further qualify the applicant not only by their: TDSR (tiotal debt service ratio) but additionally, their GDSF (gross debt service ratio) + an additional 2% to the rate being offered.
While OSFI is attempting to negate any future strss related interest rate increases for mortgagees, many lenders will see this as an opportunity to lock in and keep certain clients for a much longer period. Hey, just renew early and no need to re-qualify! Additionally, non-regulated financial institutions ie; Credit Unions, are not required to follow OSFI guidelines and thus may see this an advantage in this highly competitive market.
While all of us do not want to see mortgage defaults (market collapse) as happened in the USA some years ago, Canadian institutions have generally been very prudent with respect to approving their client applications, with a net result that over recent years, mortgage default(s) have on average have been below 1.5% in Canada, very low indeed.
Both Provincial and Federal Canadian Goverments have all waded in overe the past year or so to reign in or in some cases "strangle" the market by imposing punitive purchasing fees (BC & Ontario's 15% foreign buyers tax) in an effort to thwart offshore purchasers from over speculation.. not sure if that really was the real problem.
Are you looking to make a real estate investment here in BC? Why not start your research by chatting with a successful 25 year veteran of Vancouver's dynamic market.
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