Subject: FYI: Regulatory Changes for Mortgage Products – Update to Qualifying Rate
On February 16, 2010, the Government of Canada announced a series of regulatory changes to support the long-term stability of Canada’s housing market. The Government has now provided the following details in relation to these changes.
Effective April 19, 2010, Qualifying Interest Rates guidelines will change as follows:
- Fixed Rate Mortgages of terms less than 5 years and all Variable Interest Rate Mortgages: Applications will be adjudicated based on the greater of the 5 Year Bank of Canada Benchmark Rate**, or the actual customer rate (inclusive of any customer discretion).
- Fixed Rate Mortgages of terms 5 years or greater: Applications will be adjudicated based on the actual customer rate.
- This change applies to both conventional and insured mortgages.
- **The Bank of Canada Benchmark Rate is defined as the Chartered Bank – Conventional Mortgage 5-year Mortgage rate, published by the Bank of Canada each Monday, and can be found at http://www.bankofcanada.ca/en/
- The three key changes associated with this announcement are:
- Borrowers will need to be able to afford a five-year fixed rate mortgage, even if they choose a mortgage with a shorter duration.
- Investors, who want to buy a home that they don't plan to live in, will have to make a minimum down payment of 20%.
- Canadian home owners will only be able to withdraw 90% of the value of their homes in a refinancing, down from 95%.