Tighter lending restrictions could hit first-timers hardest

The proposals to tighten mortgage insurance underwriting practices could damage affordability especially for first time buyers according to the real estate association in British Columbia.

OSFI began a consultation period for changes to its Guideline B-20 in July with three key proposals:
  • Requiring a qualifying stress test for all uninsured mortgages;
  • Requiring that Loan-to-Value (LTV) measurements remain dynamic and adjust for local market conditions where they are used as a risk control, such as for qualifying borrowers;
  • Expressly prohibiting co-lending arrangements that are designed, or appear to be designed to circumvent regulatory requirements.
The period for submissions closed last week.

The British Columbia Real Estate Association says that the housing market is still adapting to recent changes including the tightening of mortgage lending regulations last fall and the recent interest rate rise.

“Requiring all uninsured mortgages to have to qualify for a higher mortgage rate than can be negotiated between borrowers and lenders may put homeownership out of reach in some markets,” the association wrote on its blog.

The association says that more changes could imbalance local markets and is calling on the federal government not to make fundamental changes to the national housing finance system at a time of rising interest rates.

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