With several Big-Five bank CEOs calling for regulatory action to slow the red-hot housing market, it didn't take long for the Office of the Superintendent of Financial Institutions (OSFI), the governor of federally regulated financial institutions, to respond. In a news release issued today, OSFI proposed an increase in uninsured mortgages' qualifying rate to the higher of the mortgage contract rate plus 200 basis points or 5.25% as a minimum floor.

Based on posted rates of the country’s six largest lenders, the current threshold is at 4.79%. Before the pandemic, the posted rate was widely considered too high relative to much lower contract rates. Remember, Canada's six largest lenders under OSFI's jurisdiction set the posted rate each week when they submit to the Bank of Canada the so-called 'conventional 5-year mortgage rate'. It has increasingly born little relationship to actual contract rates.

OSFI, once again, shows itself to cozy up to the Canadian banking oligopoly. Keep in mind that delinquency rates on the Canadian banks' mortgage books are very low--both in historical terms and compared with financial institutions in the rest of the world.

In the release, OSFI said, "The minimum qualifying rate adds a margin of safety that ensures borrowers will have the ability to make mortgage payments in the event of a change in circumstances, such as the reduction of income or a rise in mortgage interest rates. As mortgages are one of the largest exposures that most banks carry, ensuring that borrowers can repay their loans strongly contributes to the continued safety and soundness of Canada’s financial system."

The comment period ends on May 7. OSFI reported that they would communicate the revised B-20 Guideline by May 24, with an implementation date of June 1, 2021.

This all but ensures that the current boom in home buying will accelerate further in the spring market--providing an impetus for borrowers to get in under the June 1 deadline. OSFI's move will trigger an even hotter spring housing market as demand is pulled forward just as it was before the January 1, 2018 implementation date of the current B-20 ruling.

This will not impact non-federally regulated FI's such as credit unions, mono-lines and private lenders, nor does it immediately impact insured-mortgage borrowers.


The federal government is in charge of mortgage qualification for insured mortgages. CMHC and the finance department could well follow OSFI's lead in tightening qualifying rules for insured loans.
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The market is still very hot with people over bidding and properties having multiple offers. We also heard Bank of Canada's announcement confirming that they will not be increasing rates until January 2023. If this continues, prices will continue to go up due to the low rates.

Things are definitely getting busy around here with spring around the corner but we're looking forward to better weather and sunnier days!

STARTING RATES:

Banks and credit unions

5 yr variable starting at 1.35%
5 yr fixed starting at 2.14%

B-lenders

Starting at 2.54% + 1% fee

Private lenders

Starting at 4.95% + 2% fee.

*Rates may change without notice. Subject to approval.
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I have listed a new property at 10071 Springhill Crescent.
The highest level of quality and finishing details are apparent in this new home in the highly sought after “Springs” area of Steveston North. This stunning family home has 6 bedrooms, is over 3,700 sq/ft and sits nicely on a 7,280 sq/ft lot. This house has big revenue with separate entrances for 2 of studio bedrooms upstairs, a legal 1-bedroom suite and an additional large studio bedroom. Finished in 2019, beautiful stone floors, very open concept family room with eating nook, wok and big bright backyard. 4 big bedrooms upstairs, each with ensuite, master has extra large sun-deck with view of ocean and mountains. Quiet neighbourhood street walking distance to the ocean, parks both elementary and high school and all the amenities of Steveston.
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