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What do OSFI’s new borrowing limits mean for you?

Last week, Canada’s banking regulator, the Office of the Superintendent of Financial Institutions (OSFI) announced new restrictions on the number of mortgages lenders are allowed to provide. Specifically, this new rule applies to mortgages that are more than 4.5 times larger than the borrower’s income. Here’s what this means for you.

What does OSFI’s new rule include?

These new measures relate to a borrower’s loan-to-income (LTI) ratio. This is a simple figure that compares the size of your mortgage to your annual income. Mortgage lenders will need to carefully monitor the loans they provide that exceed a borrower’s income by more than 4.5 times. For example, a person with an average income of $100,000 would need a loan above $450,000 to hit that threshold. Lenders will only be permitted to finance a certain amount of mortgage loans in this range.

Each institution will have a limit specific to their organization, and lenders must manage their portfolios every quarter to ensure they are staying within their boundaries. If you are a future borrower, OSFI’s announcement is important to understand. Once lenders have to restrict mortgage loans of this size, they will only be able to serve so many borrowers who fall into this category. If your mortgage amount does not exceed 4.5 times your income, this will not impact you. However, if you are relying on securing a large mortgage, you should be aware of these upcoming restrictions. 

The goal of OSFI’s new rules is to reduce the number of highly indebted borrowers, especially during a period of economic uncertainty and high debt levels. These changes are expected to take effect during the first quarter of 2025. If you have any concerns about how this could impact your future borrowing experience, we encourage you to reach out! Working with a broker will help ensure you secure the mortgage product you need.

If you have any questions about your mortgage, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.