Education Centre

History of Mortgage Rules

Waves 3

Canada’s housing market hadn’t seen much change from its governing bodies, until 2008. Here are the major rule changes, policy updates, and regulations put in by each governing body.

November 2006

Canada Mortgage and Housing

Expansion of Inured Mortgages
CHMC announces mortgages with amortizations up to 40 years can be insured, as well as zero-down payment mortgages.

March 2007

Canada Mortgage and Housing

Expansion of Inured Mortgages

CHMC announces mortgages for self-employed borrowers will be insured.

March 2008

Department of Finance Canada

CMHC Insurance Limit Raised

The Department of Finance raises the aggregate amount of insurance that CMHC can have outstanding to $450 billion from $350 billion.

July 2008

Department of Finance Canada

Amortization Reduction

The maximum amortization period is shortened from 40 years to 35 years.

Minimum Down Payment

The requirements for a 5% minimum down payment is established.

New Loan Documentation Standards

New minimum documentation requirements are introduced. Lenders are required to ensure sufficient evidence of a property’s value and the borrower’s sources and level of income.

Establishment of a Minimum Credit Score

The new rules establish a credit score floor of 620, but allow for some limited exceptions.

February 2010

Department of Finance Canada

Reduction of Insured Refinancing

The maximum amount for insured refinancing is reduced to 90% from 95%. 

Qualification Change for Terms Under 5 Years

Variable and fixed rate mortgages with terms less than 5 years are required to be qualified using the 5-year posted rate/qualifying rate.

Rental Property Down Payments

A 20% down payment is implemented for small rental properties.

January 2011

Department of Finance Canada

Reduction of Insured Refinancing

The maximum amount for insured refinances is reduced to 85% from 90%.

Amortization Reduction

The maximum amortization period is shortened to 30 years from 35 years on insured mortgages.

April 2011

Department of Finance Canada

HELOC Insurance Removal

Home Equity Lines of Credit (HELOCs) no longer qualify for government mortgage insurance.

June 2012

Office of the Superintendent of Financial Institutions

Reduction of Insured Refinancing

The maximum amount for insured refinances is reduced to 80% from 85%.

Mortgage Insurance Restrction

The government announces mortgages of more than $1 million are no longer eligible to be default-insured.

Amortization Reduction

The maximum amortization period is shortened to 25 years from 30 years on insured mortgages.

Minimum Credit Scores

New gross debt service (GDS) and total debt service (TDS) limits of 39% and 44%, respectively, are implemented for borrowers with a credit score of 680+.

August 2013

Canada Mortgage and Housing

Securitization Changes

CHMC introduces a new allocation procedure for market NHA-MBS. Issuers are required to file quarterly allocation requests as the new procedure is determined quarterly based on available capacity for new guarantees.

Office of the Superintendent of Financial Institutions

Securitization Changes

CHMC announces that federally-regulated lenders who securitize mortgages to third-party investors will be granted off-balance-sheet treatment. This allows OSFI-regulated lenders to increase their organizational capacity.

January 2014

Canada Mortgage and Housing

Insurance Changes

CMHC announces it will start paying a risk fee of 3.25% of all insurance premiums written, as well as 0.10% of bulk, portfolio, and low-LTV insurance premiums.

December 2015

Canada Mortgage and Housing

CMHC Changes to Securitization Program

CMHC announces changes to its securitization programs (NHA-MBS and Canada Mortgage Bond):

  1. For 2016 CMHC increased the amount of mortgages it will provide its guarantee of timely payment of interest and principal on insured mortgages to $145B, up from $120B in 2015.
  2. CMHC also increased government guarantee fees under the NHA-MBS and CMB programs.

Department of Finance Canada

Minimum Down Payment Changes

The government announces that for homes priced above $500,000, a 10% down payment is required for the portion of the mortgage above the half-million mark. 

April 2016

Office of the Superintendent of Financial Institutions

OSFI Capital Requirement Changes

OSFI releases proposed changes to its regulatory capital requirements for mortgages. The new requirements introduce risk-sensitive floors on capital for mortgages and apply to new originations, renewals and refinances.

September 2016

Office of the Superintendent of Financial Institutions

OSFI Capital Requirement Changes

OSFI releases its draft advisory regarding revised capital requirements for mortgage insurers, which came into effect on January 1, 2017. The new requirements increased the amount of capital required to be held by mortgage insurers due to more drivers involved in the required capital formula. Some of the key determinants of the new capital requirements are:

  1. LTV and type of mortgage
  2. Credit score
  3. How long it has been since the credit score was last pulled
  4. The likelihood of a borrower’s credit score moving materially up or down
  5. Amortization period
    How long the mortgage insurance policy has been in force
  6. Which region the underlying home is located

October 2016

Department of Finance Canada

Mortgage Qualification Change

All high-ratio insured mortgages must now be stress tested using the 5-year posted rate (qualification rate).

Elimination of low-LTV Insurance for Certain Mortgages

The Government of Canada eliminates the availability of low-LTV insurance for certain types of mortgages (e.g., borrowers taking equity out of their home; mortgages with amortization periods over 25 years; home purchase prices over $1 million; borrowers with credit scores under 600; investment properties, etc.). Low-LTV mortgages must also meet the same eligibility requirements as high-LTV mortgages.

Capital Gains Exemption

The government introduces a principal residence capital gains exemption. Any individual who was not a resident in Canada in the year the property was acquired will no longer be able to claim the exemption. Effective October 2, 2016, taxpayers claiming the exemption must also file the claim through the CRA (previously documents were only produced if audited).

Mortgage Insurer-Lender Risk Sharing Exploration

The government launches public consultation on the potential to introduce some form of mortgage insurer-lender risk sharing. A consultation paper was released in late October 2016.

January 2017

Canada Mortgage and Housing

CMHC Fee Increases

New OSFI Capital Requirements for Federally Regulated Mortgage Insurers takes effect January 1. Soon after, CMHC announces premium price increases for borrowers with down payments between 5% and 25%, effective March 17, 2017. These mortgage insurance price increases reflect OSFI’s significantly higher capital requirements for mortgage insurers. The price changes represented an approximate 12%–15% increase to high-LTV mortgage insurance. Genworth MI Canada and Canada Guaranty followed suit and matched CMHC’s price increases.

April 2017

Canada Mortgage and Housing

CMHC Introduces New Fee

CMHC introduces a 0.01% administration fee that will be assessed against a portion of an issuer’s unused NHA-MBS guarantee allocations beyond a specified threshold.

October 2017

Office of the Superintendent of Financial Institutions

OSFI Announces Final B-20 Guidelines

OSFI unveils its final B-20 guidelines regarding residential mortgage underwriting practices and procedures for federally regulated financial institutions. It includes a new stress test that would require potential borrowers to qualify for underwriting using the higher of their contracted mortgage rate + 200 bps or the 5-year benchmark fixed rate published by the Bank of Canada.

As part of OSFI’s final B-20 guidelines, federally regulated financial institutions are disallowed from arranging (or appearing to arrange) a mortgage or combination of mortgages secured by the same property that would circumvent the maximum LTV ratio as defined in a lender’s underwriting policies or legal requirements.

Finally, OSFI’s new B-20 guidelines introduce greater due diligence, including: intended use of loan (e.g., purchase, refinancing), type of purchase (owner-occupied, recreational, investment, etc.), and type of refinancing (if applicable).

November 2017

Office of the Superintendent of Financial Institutions

Canadian Banks Adopt IFRS 9
The IFRS accounting standard required banks to banks to set aside additional reserves to protect against potential losses. Previously, banks only had to set aside loan reserves for known (incurred) losses. For the first time, IFRS 9 required lenders to continually assess mortgage risk throughout the life span of a loan.

January 2018

Office of the Superintendent of Financial Institutions

New Stress Test Begins
OSFI’s uninsured mortgage stress test begins.

March 2019

Department of Finance Canada

Higher RRSP Home Buyers’ Plan (HBP) Limits
Announced in the Liberal government budget of 2019, the RRSP withdrawal limit under the Home Buyers’ Plan was raised to $35,000 from $25,000. It took effect March 20, 2019.

Canada Mortgage and Housing

First-Time Home Buyer Incentive

Announced in the Liberal government budget of 2019, this plan will provide down payment assistance to first-time homebuyers by way of a shared equity program, in which CMHC will provide 5% of the purchase price for existing homes and 10% for new builds.

For default-insured purchases only; annual household income must be less than $120,000; the insured mortgage plus incentive amount cannot exceed four times the participants’ annual household income. The official launch was September 2019.

February 2020

Department of Finance Canada

New Insured Stress-Test Qualifying Rate

The Department of Finance announced changes to Canada’s benchmark qualifying rate, a key component used in stress-testing insured mortgages.

Under the new formula, insured borrowers will have to prove they can afford a monthly payment based on a rate that equals the weekly median 5-year fixed insured mortgage rate, plus 2%.

The change was set to come into effect on April 6, 2020.

OSFI announced that it was considering using the same revised benchmark rate for uninsured mortgages, or the borrower’s contract rate plus 2%, whichever is greater. 

Note: Due to extreme events related to COVID-19, the government announced in March 2020 that it will shelve this proposal for now.

March 2020

Department of Finance Canada

Canada Mortgage and Housing

Measures to Support Continued Lending

The Bank of Canada, Department of Finance and CMHC announced several mortgage measures to support liquidity in the mortgage market and those facing hardship related to the COVID-19 outbreak. Among them:

  • Launch of a $150 billion Insured Mortgage Purchase Program (IMPP).
  • Eligibility criteria for portfolio insurance were temporarily relaxed to help mortgage lenders access the IMPP. The change allows previously uninsured mortgage loans (e.g., those with 30-year amortizations and refinances) that were funded before March 20, 2020, to be eligible for mortgage insurance and to be included in future NHA MBS issuance, including:
    • Low loan-to-value mortgages with a maximum amortization term up to 30 years commencing from when the loan was funded.
    • Low loan-to-value mortgages whose purpose includes the purchase of a property, subsequent renewal of such a loan, or refinancing.

June 2020

Canada Mortgage And Housing

Stricter Underwriting Rules for CMHC-Insured Mortgages

CMHC announced the following underwriting changes for CMHC-insured mortgages that will take effect July 1, 2020:

  1. Lowering the maximum gross debt service (GDS) ratio from 39 to 35
  2. Lowering the maximum total debt service (TDS) ratio from 44 to 42
  3. Raising the minimum credit score from 600 to 680 (for at least one household borrower)
  4. Banning several types of borrowed down payments