Mortgage Rule Change

The government of Canada has implemented more rule changes to mess with the already slow mortgage and real estate market. Below are the highlights of the changes.

1. On Oct 17,2016 all insured mortgages must now qualify based on the Bank of Canada benchmark rate (currently 4.64%). The old rule allowed for qualifying at the contract rate on a 5 year fixed term.
2. Portfolio (‘bulk’) insurance must now meet the same criteria as those that are high ratio insured. This change is scheduled to come into effect on November 30. This means that amortizations greater than 25 years, rental and investment properties and homes with values greater than $1M can no longer be portfolio-insured.
3. Capital gains exemptions on principal residences will apply only to residents of Canada.
4. In addition, there is further discussion about ‘sharing in risk’ that is currently borne in large part by the three mortgage insurers. While high ratio customers and portfolio insurance funders pay for this risk, there is discussion about sharing in the cost of losses beyond just the mortgage insurers. This in and of itself could have significant implications. We will continue to monitor any discussion around this as well.