New Mortgage Rules Take Effect January - More Appraisers Will be Needed in Mid-Markets

The Office of the Superintendent of Financial Institutions (OSFI) recently released its latest round of changes to the rules that most lenders must adhere to when providing mortgage loans.

There are a few changes being made. One is that they are setting a new minimum qualifying rate, or "stress test," for uninsured mortgages. This will impact mortgage approvals when the borrower has at least 20% down.

A second rule change appears to require lenders to re-evaluate their portfolio's loan-to-value (LTV) ratio based on changes in the market. The outcome of this is a little murky, given market values can fluctuate substantially in just a few months. Will this require them to "call" mortgage loans that appear to be greater than the underlying property value it's tied to, or will the total portfolio need to maintain some specific LTV number below a threshold as yet to be set by OSFI? This is a grey area that needs clarification.

The outcome to stricter guidelines and debt servicing rules is that it will push more home buyers to other, less expensive markets.

When you make it harder for people to qualify for a loan it often cools a heated market, and heats up the adjacent markets. Cities and towns within a 90 minute drive of the GTA and GVA will likely see an increase in demand, driving housing prices up.

Markets adjacent to the GTA and GVA already suffer from a shortage of residential home appraisers. The increased demand that is sure to come will place greater stress on the appraisers doing their best to keep up. Don't be surprised if turn-around times for reports increases in the next 6 months.