David Ford
other
Whenever OSFI is “considering” anything, it’s happening. Let’s be very alert not to hit the panic button. All this change does is level the playing field between qualifying for a Variable Rate and qualifying for a Fixed Rate Mortgage. Three years ago, OSFI passed legislation that anyone choosing a 4 Year Fixed Rate or less or Variable Rate Mortgage would have to qualify at their posted rate (hovering around 5%) Starting Jan 1, 2018 ALL mortgages must qualify at that benchmark rate OR the Contract Rate they offer you + 2.00% – Most banks are around 3.49% for a 5 Year Fixed Mortgage so you’d have to qualify at 5.49% to obtain that product. This makes Variable Rate Mortgages more attractive again as the posted rate is 4.89% in comparison. It’s likely we’ll see Fixed Rates come down a bit more but still harder to qualify for those rates presently.
People ask me – IS this the sky about to fall now? No. Not even close. First off we still have a massive supply issue – the main driver in any business is always managing supply and demand. On the actual mortgage front, many people have still been qualifying for Variable Mortgages for the past 3 years after the same rule was implemented. Who does this affect? Current applications in the queue requiring qualification at a Contract Rate. If we’ve sent you in for a Refinance or a Purchase based on say the 3.14 or 3.19% 5 Year Fixed we still have available then you’re getting scaled back pretty hard if we wait until the New Year. Maximum Mortgage qualifying will be about 20% less. If you were qualified for a $500,000 mortgage now your max would be approx. $400,000 and so on. This is not to be taken lightly if your Purchase or Refinance needs to qualify at the lower rate. Our phones have been ringing off the hook this week with fence sitters that are now jumping in the direction of acting prior to December 31st. With good reason. It’s going to slow down people using the equity in their home to Refinance or our “Classic” Refinance to Purchase more property (I can’t count the number of those we’ve done over the past three years as our motivated clients have capitalized on rising rental returns and capital appreciation of real estate)