Federal government lending regulation changes since 2008
The government has taken several actions to curb housing risks.
Let’s have a look at Ottawa’s actions since the 2008 recession:
The government is announcing the new stress test start date. Starting January 1, 2018, first time buyers who have 20 per cent down payment or more will also have to qualify based on a new stress test.
- OSFI requires smaller banks to perform a stress test requiring borrowers with less than 20 per cent downpayment to qualify for the Bank of Canada’s posted five-year rate.
- Borrowers with a down payment at or above 20 per cent to meet these same eligibility requirements.
The minimum down payment increases for insured high-ratio mortgages. Anyone who is looking to buy a home valued between $500,000 – $1 million will now put 10 per cent downpayment. Up from 5 per cent downpayment.
- For these with less then 20 per cent downpayment, the maximum amortization period was reduced from 35 years to 25 years only.
- A new stress test was implemented. To qualify for a high-ratio mortgage, a home buyer’s debt costs could be no more than 44 per cent of their income.
- Home owners who are going to refinance their mortgage can now borrow a maximum of 80 per cent of a property’s value, down from 85 per cent.
- Government-backed insured high-ratio mortgages were available only on homes valued at less than $1 million.
Ottawa is reducing the maximum length of an insured high-ratio mortgage from 35 years to 30 years. Home owners who are refinancing can now borrow 85 per cent, a change from 90 per cent.
- The maximum amount home owners could borrow when refinancing a mortgage has reduced from 95 per cent of home’s value, to only 90 per cent.
- A new rule came out requires owners who are not living on a property. A minimum 20 per cent down payment if they needed government-backed mortgage insurance.
The maximum length of an insured high-ratio mortgage was reduced by Finance Minister Jim Flaherty from 40 years to 35 years.
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