Categories for Rate Regulation

A Case Where Banks Lose & Credit Unions Win

Canada’s new “B-20” mortgage stress test will be a tectonic shift for the roughly 1 in 6 borrowers it affects, starting January 1. It’s going to force higher-indebted creditworthy borrowers to either: reduce their loan amount, seek help qualifying (e.g., find a bigger down payment or co-signor), defer their homebuying plans, or seek out a non-bank lender, like a credit...

The New Stress Test Could Affect Your Pre-Approval

If you’re among the roughly 1 in 6 conventional borrowers with the highest debt ratios, OSFI’s new mortgage stress test could keep you from: buying the home you want (which may be a good thing) renewing at better rates with another lender, or refinancing to lower your debt burden. That’s making hundreds of thousands of borrowers somewhat anxious. It’s why we’re seeing a small...

Stress Testing May Start Sooner

On Tuesday the government announced a January 1, 2018, implementation date for its new uninsured mortgage stress test. In that announcement it said something else that many glossed over: “Where possible, federally regulated financial institutions are expected to comply with the principles and expectations set out in this guideline as of the date of this letter [October 17, 2017].” OSFI told us today, “Banks are expected...

Key Mortgage Rule Clarifications from OSFI

Below are important clarifications on Canada’s new B-20 mortgage rules. Most of this stuff was not explicitly discussed in OSFI’s announcement yesterday. But if you’re getting a mortgage or HELOC, it’s need-to-know info. Amortization Limits:  One way to partially mitigate the new stress test is by extending your amortization. “OSFI has not included specific references to a ‘qualification’ amortization rate in its final Guideline B-20....

OSFI’s Mortgage Stress Test: What Happens Next

We all knew it was coming, but now the reality sets in. The ruler of Canadian banking (OSFI) has solidified a rule change that’ll impact more mortgagors than any rule we’ve seen to date. Here’s a synopsis I wrote for the Globe and Mail if you need a quick summary. The gist is this: Effective January 1, 2018, anyone with 20%+ equity who wants a low rate will have to prove they...

Private Rates Still Elevated Amid Tight Funding

Private (non-prime) lenders are getting tapped out across the country. Fisgard Asset Management Corporation, one of Canada’s largest mortgage investment corporations (MICs), is no exception. “It’s a dynamic time right now,” says Hali Noble, SVP at Fisgard. She explains that Home Capitals’ near-failure, Equitable Bank’s funding problems and government rule tightening have spiked demand for private mortgages. The company, which manages $240 million in loans, has almost fully utilized...

The New Stress Test: Still Scratching Our Heads

Canada’s banking overlord, OSFI, is proposing a new 2-percentage-point (200-bps) “stress test” for people getting uninsured mortgages. Unlike the current stress test, which is based on one rate (the Bank of Canada posted 5-year, currently 4.64%), this new one is a frequently moving target. At 200 bps above the borrower’s contract rate, it would fluctuate significantly based on the lender and term selected....

This is One Beefy Rule Change

OK, how do I put this in a way that doesn’t sound over the top or like fear mongering? There was this mortgage rule proposal today, and it was a Whopper. No. Actually, it was larger than that. More like a BK Quad Stacker with extra bacon, cheese and Stacker sauce. It was big. The potential rules announced this morning were put out...

Another Nail in Competition’s Coffin

As previously announced, CMHC is jacking up default insurance premiums on Canadian borrowers. Effective today, anyone purchasing a home with less than 20% down will fork over up to 1.00%-point more in fees. If you’re down payment is: Less than 10%: You’ll pay 0.40% more, or 4.00% Between 14.99 and 10%: You’ll pay 0.70% more, or 3.10% Between 19.99 and 15%: You’ll pay...

TD’s Mortgage Prime Hike. Just the “First Move…”

What a coincidence that TD boosted its mortgage prime rate and OSFI implemented its new bank capital requirements, both on the same day (November 1). Or not. RBC Capital Markets issued a report Tuesday suggesting the two may have been somewhat linked. It predicts further rate hikes to come: “We believe TD’s rate increase may be just the first move in a series of mortgage...