Canada’s banking regulator is tightening requirements for certain types of home loans to protect homeowners who may be more at risk if interest rates rise.
The Office of the Superintendent of Financial Institutions (OSFI) says the changes affect blended loan plans like reverse mortgages or equity loans, which have grown in popularity in recent years but can be riskier for lenders. .
For borrowers who owe more than 65% of the loan’s value, a portion of their payment must be allocated to loan principal, rather than interest, until they bring the loan below that threshold. OSFI says the changes will generally take effect the next time borrowers renew their plans after late fall 2023, depending on the lender’s fiscal year.
According to the regulator, consumers will not see an increase in their monthly payment requirements as a result of this change, and this decision will not impact new homebuyers.
Bank of Canada data shows that combined loan programs with a loan-to-value ratio above 65% account for just over 11%, or $204 billion, of the $1.8 trillion residential mortgages outstanding in the country. .
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