Homeowners can breathe a sigh of relief today as Canada’s banking regulator loosens its grip on drastic mortgage regulation proposals.
Homeowners were up in arms in reaction to proposed changes made March 19 to the Canadian mortgage underwriting process and lending guidelines. A particularly sore spot: proposed credit risk assessments upon mortgage renewal – a change that would have subjected homeowners to the possibility of no longer qualifying for their mortgage.
Taking a Softened Stance
After heeding the advice of critics who called the move a redundant imposition, the OSFI has backed down, and plans instead to conduct periodical check-ins, rather than renewal reviews.
The OSFI has also relaxed its stance against imposing HELOCs to an amortization period – meaning those home equity lines of credit will stay open ended for now. Home owners looking to use their home as collateral for extra cash can still plan to tighten their belts, though, as OSFI will continue to reduce the home-to-loan value limit to 65 per cent, from the current 80 per cent.
Measures to Deal with Canada’s Debt
The March proposals, put in place to counter Canada’s “borrowing binge” and growing household debt, drew criticism and concern from individuals and associations alike, who feared too-austere measures would spell catastrophe for Canada’s middle class and adversely affect the housing market. We shared our thoughts when the news first broke in March – click here to get caught up! You can also check out the entire draft guideline here:
The Office of the Superintendent of Financial Institutions (OSFI) is an independent agency of the Government of Canada which reports to the Ministry of Finance and is the primary watchdog of federally regulated deposit taking institutions, insurance companies and pension plans. They aim to create and maintain a competitive and resilient financial system in Canada. These updates are seen as a good sign – the homeowners have spoken and Ottawa seems to be listening!