More Changes to Mortgage Qualification on the Horizon?

Diane Buchanan • August 11, 2016

Given the current economic environment in Canada, with record levels of household indebtedness and growing risks and vulnerabilities in some housing markets, OSFI’s supervisory scrutiny in the area of mortgage underwriting will continue.” This was included in Reinforcing Prudent Residential Mortgage Risk Management published early July by the Office of the Superintendent of Financial Institutions (OSFI).

The purpose of this nice and tidy piece of government correspondence is to inform the public that OSFI will be upping their game, paying closer attention to mortgage underwriting policies. And although no hard and fast rule changes were announced, an announcement of “hey, we are paying really close attention here” is typically not made unless there has been at least some thought about what the next steps might be (if required).

So let’s take a look at some of the potential changes the government could make to mortgage qualification.

Qualifying All Terms at the Benchmark Rate

As it stands right now, variable rate mortgages and fixed rate mortgages with terms of less than five years are qualified using the benchmark rate. The benchmark rate is set higher than the actual contract rate and is used to “stress test” mortgage applications.

In our current low interest rate environment, many Canadians see the five year fixed mortgage as a good choice simply because it qualifies using the contract rate instead of the benchmark rate. This means using the five year rate, borrowers can qualify for a lot more house compared to a shorter fixed term or variable rate mortgage.

Forcing all mortgages to be qualified at the benchmark rate could be on the horizon and would most likely lessen the appeal of the five year fixed rate.

Increasing the Benchmark Rate

If the goal is to tighten mortgage qualification, a simple way to do that would be to increase the benchmark slowly but surely. The higher the qualifying rate, the less you qualify for. Plain and simple. However as this might have other economic ramifications, we’ll just have to wait and see if this is in the government playbook.

Lower Debt Service Ratios

In order to qualify for a mortgage, you take your principal, interest, taxes, and heat and divide by your annual income, this is called your gross debt service ratio or GDS. When you add your other debt obligations to this calculation, it becomes your total debt service ratio or TDS.

Currently, for insured mortgages in Canada, your maximum GDS is limited to 39% while your TDS is capped at 42%.

A simple tweak to these numbers would have a pretty significant impact.

A Flat 10% Down Payment

If you remember, back in February of 2016, the government increased the minimum down payment amount. When purchasing a property, the first $500,000 requires a minimum of 5% down, whereas the portion of the purchase price above $500,000 now requires a 10% down payment.

Seeing as though the government just made these changes, it doesn’t seem likely that they would scrap them and simply introduce a flat 10% downpayment across the board, but you never know!

Regardless of what future changes are made to mortgage qualifications (if any) to address “our current economic environment”, you can count on us to make sure you are kept in the know.

If you need anything, please contact me , I’d love to hear from you!

 

This article originally appeared in the August 2016 Dominion Lending Centres Newsletter. 

DIANE BUCHANAN
 Mortgage Broker

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Your Guide to Successfully Navigating the Housing Market

By Diane Buchanan • December 31, 2025
Wondering If Now’s the Right Time to Buy a Home? Start With These Questions Instead. Whether you're looking to buy your first home, move into something bigger, downsize, or find that perfect place to retire, it’s normal to feel unsure—especially with all the noise in the news about the economy and the housing market. The truth is, even in the most stable times, predicting the “perfect” time to buy a home is incredibly hard. The market will always have its ups and downs, and the headlines will never give you the full story. So instead of trying to time the market, here’s a different approach: Focus on your personal readiness—because that’s what truly matters. Here are some key questions to reflect on that can help bring clarity: Would owning a home right now put me in a stronger financial position in the long run? Can I comfortably afford a mortgage while maintaining the lifestyle I want? Is my job or income stable enough to support a new home? Do I have enough saved for a down payment, closing costs, and a little buffer? How long do I plan to stay in the property? If I had to sell earlier than planned, would I be financially okay? Will buying a home now support my long-term goals? Am I ready because I want to buy, or because I feel pressure to act quickly? Am I hesitating because of market fears, or do I have legitimate concerns? These are personal questions, not market ones—and that’s the point. The economy might change tomorrow, but your answers today can guide you toward a decision that actually fits your life. Here’s How I Can Help Buying a home doesn’t have to be stressful when you have a plan and someone to guide you through it. If you want to explore your options, talk through your goals, or just get a better sense of what’s possible, I’m here to help. The best place to start? A mortgage pre-approval . It’s free, it doesn’t lock you into anything, and it gives you a clear picture of what you can afford—so you can move forward with confidence, whether that means buying now or waiting. You don’t have to figure this out alone. If you’re curious, let’s talk. Together, we can map out a homebuying plan that works for you.

How to Raise Your Credit Score and Unlock Better Rates

By Diane Buchanan • December 24, 2025
Want a Better Credit Score? Here’s What Actually Works Your credit score plays a major role in your ability to qualify for a mortgage—and it directly affects the interest rates and products you’ll be offered. If your goal is to access the best mortgage options on the market, improving your credit is one of the smartest financial moves you can make. Here’s a breakdown of what truly matters—and what you can start doing today to build and maintain a strong credit profile. 1. Always Pay On Time Late payments are the fastest way to damage your credit score—and on-time payments are the most powerful way to boost it. When you borrow money, whether it’s a credit card, car loan, or mortgage, you agree to repay it on a schedule. If you stick to that agreement, lenders reward you with good credit. But if you fall behind, missed payments are reported to credit bureaus and your score takes a hit. A single missed payment over 30 days late can hurt your score. Missed payments beyond 120 days may go to collections—and collections stay on your report for up to six years . Quick tip: Lenders typically report missed payments only if they’re more than 30 days overdue. So if you miss a Friday payment and make it up on Monday, you're probably in the clear—but don't make it a habit. 2. Avoid Taking On Unnecessary Credit Once you have at least two active credit accounts (like a credit card and a car loan), it’s best to pause on applying for more—unless you truly need it. Every time a lender checks your credit, a “hard inquiry” appears on your report. Too many inquiries in a short time can bring your score down slightly. Better idea? If your current lender offers a credit limit increase , take it. Higher available credit (when used responsibly) actually improves your credit utilization ratio, which we’ll get into next. 3. Keep Credit Usage Low How much of your available credit you actually use—also known as credit utilization —is another major factor in your score. Here’s the sweet spot: Aim to use 15–25% of your limit if possible. Never exceed 60% , especially if you plan to apply for a mortgage soon. So, if your credit card limit is $5,000, try to keep your balance under $1,250—and pay it off in full each month. Maxing out your cards or carrying high balances (even if you make the minimum payment) can tank your score. 4. Monitor Your Credit Report About 1 in 5 credit reports contain errors. That’s not a small number—and even a minor mistake could cost you when it’s time to get approved for a mortgage. Check your report at least once a year (or sign up for a monitoring service). Look for: Incorrect balances Accounts you don’t recognize Missed payments you know were paid You can request reports directly from Equifax and TransUnion , Canada’s two national credit bureaus. If something looks off, dispute it right away. 5. Deal with Collections Fast If you spot an account in collections—don’t ignore it. Even small unpaid bills (a leftover phone bill, a missed utility payment) can drag down your score for years. Reach out to the creditor or collection agency and arrange payment as quickly as possible . Once settled, ask for written confirmation and ensure it’s updated on your credit report. 6. Use Your Credit—Don’t Just Hold It Credit cards won’t help your score if you’re not using them. Inactive cards may not report consistently to the credit bureaus—or worse, may be closed due to inactivity. Use your cards at least once every three months. Many people put routine expenses like groceries or gas on their cards and pay them off right away. It’s a simple way to show regular, responsible use. In Summary: Improving your credit score isn’t complicated, but it does take consistency: Pay everything on time Keep balances low Limit new credit applications Monitor your report and handle issues quickly Use your credit regularly Following these principles will steadily increase your creditworthiness—and bring you closer to qualifying for the best mortgage rates available. Ready to review your credit in more detail or start prepping for a mortgage? I’m here to help—reach out anytime!