Mortgage rule changes could have profound impact

by Diane Macpherson

In late 2016, The Department of Finance announced changes to the qualification rules for a mortgage. These changes were announced with no warning to the mortgage industry and almost no consultation. The mortgage lending industry has concerns about the potential impacts and unintended consequences of these changes for Canadian Consumers. The changes are:

1. All insured mortgages with a down payment of less than 20% will now need to qualify at the Bank of Canada benchmark rate (currently 4.64%) regardless of the contract rate offered on their commitment. This change came into effect on October 17, 2016.

2. Portfolio (‘bulk’) insurance must now meet the same criteria as those that are high ratio insured. This change came into effect on November 30. This means that amortizations greater than 25 years, rental and investment properties, refinances, and homes with values greater than $1M can no longer be portfolio-insured.

3. In addition, there is further discussion about ‘sharing in risk’ that is currently borne in large part by the three mortgage insurers (and in large part back stopped by the Federal Government). While high ratio customers and portfolio insurance funders pay for this risk, there is discussion about sharing in the cost of losses beyond just the mortgage insurers.

How will this impact consumers?

1. A large contingent of borrowers may see their overall purchasing power artificially reduced by upwards of 20%. For example, a consumer that previously qualified to purchase a home for $300,000 may now only qualify to purchase a home of $240,000.

2. These changes have already increased the mortgage rates by .15 - .40%, costing Canadians thousands more dollars through the lifespan of their mortgage.

3. We have already seen a reduction in the number of lenders in the Canadian marketplace, leading to less competition and mortgage availability.

How can I make a difference?

1. Mortgage Professionals Canada is advocating for the government to consider the unintended consequences that will result from the implementation of these new rules. MPC has learned the Standing Committee on Finance will be undertaking a study on the impacts of the federal government's October changes to mortgage insurance eligibility. This is a direct result of the voting public voicing their concerns to their MPs. 

If you wish to make your views known to your local MP, Mortgage Professionals Canada (Canada’s national mortgage broker industry association) has a letter you may wish to send to ensure your voice is being heard regarding the federal government’s recent mortgage rule changes which are negatively impacting Canadians across the country.

The link to the letter is

First-time buyers in particular may want to indicate how the new higher stress test qualifications are preventing them from qualifying for a mortgage.

Mortgage Professionals Canada is well aware Canadians are very concerned about affordable homeownership. How are these latest mortgage rule changes helping in this regard? They simply are not.

On a final point, it should be noted other housing-related industry associations such as the Canadian Home Builders Association and the Canadian Real Estate Association (CREA) are concerned as well.

I am told CREA has their own advocacy campaign with their members to apprise MPs of the potential impact of the new regulations and how they can price first-time buyers out of the housing market.

As we head in to 2017, I believe all of us will be monitoring our mortgage brokerage activity closely as will home builders and REALTORS® in respect to their starts and sales activity.

It is MPC’s hope and expectation that the Standing Committee on Finance is listening to Canadians, and that they will take their views seriously with an open mind to make changes given how they are impacting Canadians ability to afford a home.

Diane Macpherson is the Manitoba Director of Mortgage Professionals Canada.