To summarize the four mortgage rule changes that came out this morning, the government is implementing the following:
A mortgage rate stress test that will be required for all insured mortgages. Aside from qualifying for the contracted rate, borrowers will also have to qualify for the Bank of Canada’s five-year fixed posted mortgage rate (currently 4.64%).
New restrictions on when the government will provide insurance for low-ratio mortgages. These include a 25-year (or less) amortization period, purchase price of <$1M, a credit score of 600, and that the property be owner-occupied.
New reporting rules for the primary residence capital gains tax exemption. Sellers must now report the sale of their primary residence to the CRA. The goal of this is to stop foreigners from claiming a primary residence tax exemption on the sale of homes that they buy and sell here.
Potential lender risk-sharing. The federal government currently carries all of the risk on insured mortgages, but it will be releasing a public consultation paper on a proposal to share the cost of default with mortgage lenders. This change may result in increased mortgage rates.
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