New mortgage rules

What new mortgage rules mean for you


There was a lot of chatter in Ottawa this past fall over new mortgage rules and how these changes may impact first-time home buyers.

Here is a summary of what’s new and what has changed regarding home purchases:

  • The key difference for Vancity members is a new standardized mortgage rate “stress test” for insured mortgages (financing for less than a 20% down payment).
  • Prior to this change, only members who took out mortgage insurance on a variable rate and/or mortgage with less than a five-year term had to undergo a stress test.
  • Members needing an insured mortgage must qualify based on the Bank of Canada conventional five-year fixed posted rate. This rate is typically higher than the negotiated rate offered by financial institutions. Currently, the Bank of Canada rate is 4.64%.
  • This change may affect the size of the mortgage available to a member.

Example please…

Here’s a purchase example to illustrate how the new regulations work: someone with a $60,000 annual income and a down payment of 5% will likely qualify for a $280,000 mortgage under the new mortgage insurance rules, compared to qualifying for a $345,000 mortgage under the old rules.

This example is based on the following:

  • Good credit
  • Little to no consumer debt
  • Property taxes  of $100
  • Strata fees of $200
  • Heating expense of $50
  • Contract rate of 2.79%
  • Bank of Canada rate of 4.64%

So is this good or bad?

The good news: members qualify as if rates were higher to ensure that, should rates rise, they will be able to afford the increase. The bad news: in this (still) very expensive market, buyers – especially first timers – have fewer options for what they are able to purchase.

Qualifying for a mortgage is never a “one size fits all” exercise. When looking for a new home, determining your financial comfort level is just as important as deciding what comforts you’d like your new home to have.


And now a note from our lawyers…

This blog post provides general information only, and does not constitute financial, accounting, tax, legal or other professional advice. We encourage you to obtain personalized advice from qualified professionals regarding your particular circumstances. Please see our Terms of Use.


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