Stress Testing Vancouver Real Estate Under OSFI’s New B-20 Guidelines
The Office of the Superintendent of Financial Institutions (OSFI) has published guidelines around regulations of mortgage lending. These changes will come into effect on January 1, 2018.
OSFI Stress Testing Conventional Mortgages
A conventional mortgage is one with a down payment higher than 20%. Basically, any mortgage with a down payment higher than 20%, would require the borrower to prove they can pay the mortgage at a rate 2% higher. This would put conventional borrowers on the same page as insured borrowers.
Borrowing in Vancouver Today
Under today’s lending conditions, not a whole lot of people can afford a conventional mortgage in Vancouver on a typical home. A typical home in Vancouver is now a whopping $1,037,300 according to the REBGV. The lowest mortgage rate we could find without digging too hard is 2.89%. After a 20% down payment, only 24.21% of Vancouver households can carry the payments for a typical home, under existing rules. This assumes very good credit, but not perfect.
Stress Testing Vancouver Households
Under the new guidelines, borrowing power drops by just over 25%. Vancouver is one of the few cities in the country to be significantly impacted by these rules. Stress testing drops the number of Census households that could carry a traditional mortgage on a typical home down to 16.68%.
On the other side of things, ensuring that people can continue to pay their mortgage at a higher rate is the responsible thing to do. However, there will be an impact on the number of people that could borrow. This either drops transaction volume significantly, as less people can qualify to borrow enough. Or this drops home prices, to continue the transaction volume.
How Client First Mortgage Solutions Can Help You
Due to all of the recent changes to mortgage rules, now more than ever you should be talking to an experienced Mortgage Advisor for mortgage advice. What are the benefits of using us? At Client First Mortgage Solutions we benefit you by providing a transparent application process that gives you – the home buyer – current market information, more power and less hassle. Rather than shopping rates from lender to lender, we handle the entire process on your behalf by assessing your financing options and seeking competitive bids from lenders. Contact us today!
Original Article – Better Dwelling – October 17, 2017
