New Mortgage Rules Could Make Buying A House Ever Harder
OSFI's 4.5x income crackdown on investor portfolios
In this episode, we look at some changes in the mortgage market that could really make things harder:
30 year mortgages may not even help, since new homes need a 20% deposit anyways.
OSFI's 4.5x income rule: it’s never been more important to buy cash flow.
CRA direct links for your mortgage income verification
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OSFI cracking down on portfolios
The Office of the Superintendent of Financial Institutions (OSFI) states that the new portfolio test aims "to prevent the buildup of highly leveraged loans during low interest rate periods." The regulator is especially concerned about loans exceeding 4.5 times the borrower's income. Such loans heighten the risk of borrower default and amplify potential losses for lenders. This kind of debt may be manageable in a low-rate environment like the one we saw during the pandemic, but it becomes much more challenging for borrowers and their financial institutions when rates increase.
The funny part
The funny part is that investors actually consume the fewest individual mortgages over 4.5x income out of anyone in the market, per Bank of Canada data from “indicators of financial vulnerabilities”. That being said, it will definitely cap exposure on a portfolio basis and make it more important than ever for investors to buy for cash flow to increase buying power, rather than capital appreciation.
