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Montreal to Tighten Mortgage Regulations by November

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According to an announcement made by Canada’s financial institutions, home buyers will face tighter mortgage regulations by November 1 of this year.

These rules have been put in place to regulate hot markets, especially in cities where the real estate has been over-valued such as Toronto and Vancouver. However, the OSFI requirements will take effect in banks and lenders across Canada, including stable markets like Montreal. The proposed changes reflect the increased risks in the Canadian mortgage market as a whole.

Policymakers have warned buyers of the risks of an overpriced housing market, which has prompted the Liberal government to limit taxpayer exposure to any potential price correction and real estate market downturn. The CMHC’s suggestion to hold more capital for residential mortgages to protect against defaults is finally coming to fruition after months of warning.

What does this mean for the taxpayer?

The objective of the new mortgage regulations is to put more responsibility on financial institutions, in the case of potential defaults, market correction and price falls. In response to the damage caused by the American real estate collapse in 2008, Canada is attempting to protect taxpayers from the effects of over-leveraged financial institutions.

Related: How to get your Finances Back on Track Before the New Years

What does it mean for the Canadian home buyer?

Banks and mortgage lenders will be required to increase how much capital they hold to cover the capital they hold in mortgage debts. To absorb these higher costs, they will either increase mortgage rates or implement tougher lending requirements for those applying for a mortgage.

For the average home buyer in Montreal, this could mean that by November, they may experience:
more difficulty in acquiring a mortgage
→ higher mortgage rates
→ receiving a lower pre-approval than previously anticipated

Further Reading:
Three Questions to Ask Your Mortgage Lender
10 Terms You Should Know Before Getting a Mortgage
The Advantages of Getting Pre-Approved

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