The Office of the Superintendent of Financial Institutions (OSFI) wants to propose tighter lending rules for mortgages. OSFI regulates banks only and not credit unions, so unions such as Meridian Credit Unions don’t have to abide by these rules. These rules are only proposed at this point and OSFI is seeking feedback until April 14th, 2023.

Essentially, these new rules will make it harder to attain a mortgage.

99.86% of Canadians pay their mortgages on time, which means that the default rate is 0.14%. Instead of relaxing the mortgage Stress Test, which means that buyers are qualified at 2% above the rate to get a mortgage, OSFI wants to make it harder to get a mortgage.

Their proposed changes are:

1. Limit mortgages given to those whose mortgage is 4.5 times greater than their income. They want to limit lending of new loans like this to 25% per quarter.
2. Toughen rules for those who have a down payment of more than 20%.
3. Changing the mortgage Stress Test to correspond more closely with a loan’s level of risk.

These proposed changes will push more borrowers to Credit Unions and private lenders, as it will be harder for individuals seeking a mortgage from banks. Based on data from the CMHC, non-bank lenders originated $183.61 billion worth of mortgage loans in 2021. While close to half of that were from Credit Unions, there were still 306,000 mortgage loans originated in 2021 by private lenders, worth close to $100 billion.