History of Mortgage Rules

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.

Expansion of Inured Mortgages

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

Nov 2006
Expansion of Inured Mortgages

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

Mar 2007
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.

Mar 2008
Amortization Reduction, Minimum Down Payment, New Loan Documentation Standards, Establishment of a Minimum Credit Score

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

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

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.

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

Jul 2008
Qualification Change For Terms Under 5 Years

The Department of Finance mandates that high-ratio default insured mortgages with variable rates or terms less than five years must be qualified using the benchmark 5-year posted rate (mortgage qualifying rate).

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

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

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

Apr 2010
Reduction Of Insured Refinancing, Amortization Reduction

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

The maximum amortization period is shortened to 30 years from 35 years on insured mortgages.
Home Equity Lines of Credit (HELOCs) no longer qualify for government mortgage insurance. This rule took effect on April 18, 2011.

Jan 2011
Reduction of Insured Refinancing, Mortgage Insurance Restriction, Amortization Reduction, Minimum Credit Scores

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

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

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

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+.

Jun 2012
Securitization Changes, 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.

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.

Aug 2013
CMHC Changes to Securitization Program, Minimum Down Payment Changes
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.

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.
Dec 2015
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.

Apr 2016
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
Sep 2016
Mortgage Qualification Change, Elimination of low-LTV Insurance for Certain Mortgages, Capital Gains Exemption, Mortgage Insurer-Lender Risk Sharing Exploration

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

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.

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).

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.

Oct 2016
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.

Jan 2017
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.

Apr 2017
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).

Oct 2017
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.

Nov 2017
New Stress Test Begins

OSFI’s uninsured mortgage stress test begins.

Jan 2019
Higher RRSP Home Buyers' Plan (HBP) Limits, First-Time Home Buyer Incentive

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.

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.

Mar 2019
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.

Feb 2020
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.
Mar 2020
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
Jun 2020
Higher Minimum Qualifying Rate For Uninsured Mortgages

In April 2021, OSFI unveiled a proposed higher minimum qulaifying rate for uninsured mortgages. Starting in June 2021, borrowers will be stress tested at the higher of their contract rate plus 2% or a 5.25% floor rate, up from a minimum rate of 4.79% at the time. OSFI also announced it will revisit the calibration of the qualifying rate each December, at a minimum, “to ensure it remains appropriate for the risks in the environment.”

Jun 2021

History of Mortgage Rules Sources: Department of Finance, OSFI, CMHC, RBC, BMO, National Bank, RateSpy.com