What this means for your mortgage

Here’s how the rules would play out for a family with $100,000 in annual income, according to numbers provided by Ratehub.ca, a mortgage rates and credit cards comparisons site.

Let’s consider a first scenario in which the family is offered a mortgage rate of 2.83 per cent, which is more than two percentage points below the current Bank of Canada five-year benchmark of 4.89 per cent.

If they were to apply for a mortgage today, with 20 per cent down payment, a five-year fixed mortgage, and a 25-year amortization period, they would be able to afford a home worth $726,939.

If they were to apply for a mortgage on or after Jan. 1, they would be able to afford only $570,970, with a 20 per cent down payment.

New rules likely to push buyers toward provincially-regulated lenders, cheaper homes

The new rules will likely further slow down housing activity, possibly dragging down prices by between 2 and 4 per cent over 2018, TD economist Brian DePratto wrote in a research note.

“On balance, these changes should help enhance the resilience of the Canadian banking system in a rising interest rate environment,” reads the note.

The new rules will likely also push some buyers toward provincially-regulated mortgage lenders, such as credit unions, which are not affected by the OSFI changes, DePratto told Global News via phone.

And some prospective home buyers will be forced to opt for cheaper homes, like townhouses and condos, he added.

The final guidelines are generally similar to what OSFI had proposed in July when the regulator put out a draft for public consultation.

The proposed changes, however, have been criticized for potentially increasing costs and limiting access to mortgages for some home buyers.

Meanwhile, the OSFI says the changes are warranted.

“These revisions to Guideline B-20 reinforce a strong and prudent regulatory regime for residential mortgage underwriting in Canada,” said OSFI superintendent Jeremy Rudin in a statement on Tuesday.

Other changes include restrictions on co-lending, or bundled mortgages, aimed at ensuring financial institutions do not circumvent rules that limit how much they can lend.

 

– With files from the Canadian Press