The Office of the Superintendent of Financial Institutions (OSFI) recently proposed a change to uninsured qualifying rate rules. Upon confirmation, effective June 1, 2021, OSFI will require uninsured mortgages to qualify at the greater of:
- the OSFI-defined five-year minimum qualifying rate (5.25%) or
- the customer’s contract rate + 2%.
Example: If the customer’s contract rate is 2.29%, their qualifying rate would be the 5.25% OSFI rate, since it’s higher than the contract rate + 2%.
Further updates to OSFI’s proposed qualifying rate rules, if any, will be communicated as they become available.
What you need to know
- The impact to the customer of this change is estimated to be up to a 4% reduction in the principal amount, depending on the customer’s circumstances.
- Existing pre-approvals must have a Purchase and Sale Agreement (PSA) signed before June 1, 2021 in order to not have to requalify under the new rate rules.
- A signed PSA means the offer has been accepted prior to June 1, 2021. There may still be conditions to be waived or fulfilled.
- For refinances, any new submissions or resubmissions with material changes received on or after June 1, 2021 will be qualified under the new qualifying rate rules.
The below table outlines scenarios where a customer would qualify under the pre-June 1st rules or the new rules.
- Pre-June 1st qualifying rate rules: Greater of Bank of Canada benchmark (4.79%) and customer’s contract rate + 2%
- New qualifying rate rules: Greater of OSFI minimum qualifying rate (5.25%) and customer’s contract rate + 2%