Expanded stress testing of mortgages will have “a significant dampening effect” on the housing market and could hit move-up home buyers hardest, says BMO Financial Group chief economist Doug Porter.
The latest lending restrictions announced by the Office of the Superintendent of Financial Institutions (OSFI) on Tuesday, could also slow interest rate increases next year if the Bank of Canada pauses to assess the impact of the new borrowing rules, he said.
Under the new rules, even home buyers who don’t require mortgage insurance because they have a 20 per cent downpayment, will have to prove they can meet their commitment if interest rates rise above the five-year benchmark rate published by the Bank of Canada or 2 per cent higher than their contracted mortgage rate, whichever is higher.
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