New rules from the Office of the Superintendent of Financial Institutions (OSFI) are creating more stringent stress tests for homebuyers. This will push some first-time buyers out of the market – for now. But the rules help to maintain healthy real estate and financial sectors
For example, a family with an income of $100,000 that currently could afford a home for $726,000, would only be able to afford a home worth $570,000 after the OSFI rules kick in.
Some people might call this unfair. But it’s important to consider how these mortgage rules will affect the health of the entire real estate market.
When interest rates rise, some mortgage payers could unfortunately be caught off-guard and could run into financial trouble. It is critical for first time buyers to purchase within their means – and that’s what the new mortgage rules will help achieve.
There could be trouble if buyers can’t manage their down payments when interest rates rise. Banks are affected, and housing prices could fall which impacts the financial health of existing home owners.
In conclusion, the job of the OSFI is to ensure that financial institutions remain healthy. The OSFI has a good track record of decision making too. The 2008 financial crisis didn’t hit Canada as hard due in part to the OSFI. Arguably, the health of financial institutions is more important to society than the ability of first time home buyers to get into the market.