More Changes to Mortgage Qualification on the Horizon?

Katherine Martin • August 8, 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. 

Katherine Martin


Origin Mortgages

Phone: 1-604-454-0843
Email: kmartin@planmymortgage.ca
Fax: 1-604-454-0842


RECENT POSTS

RRSP Home Buyers’ Plan Explained: A Smart Way to Buy Your First Home

By Katherine Martin • August 5, 2026
Saving for a down payment is one of the biggest challenges first-time buyers face. What many don’t realize is that the Canadian government offers a program designed to make it easier—the Home Buyers’ Plan (HBP) . This program allows you to withdraw money from your RRSP to help purchase your first home, without immediate tax consequences. Here’s how it works: Who Qualifies? To be eligible, you generally need to be a first-time home buyer. In practical terms, this means you must not have owned a home in the past four years, nor lived in a property owned by your spouse or partner during that time. There are also special allowances if you’re living with a disability or helping a relative with a disability. In these cases, you can use the HBP even if you’ve owned a home more recently. How Much Can You Withdraw? Under the program, you can access up to $35,000 from your RRSP as an individual. Couples can combine their withdrawals for a total of $70,000 . These funds must have been in your RRSP for at least 90 days before you take them out. Paying It Back The HBP isn’t “free money”—it’s an interest-free loan from your own retirement savings. You’ll have 15 years to repay the full amount back into your RRSP, starting in the second year after withdrawal. Each year, the CRA will send you an HBP Statement of Account outlining how much needs to be repaid. If you don’t make your repayment in a given year, that amount will be added to your taxable income. Why It’s a Smart Strategy The HBP can give first-time buyers a powerful boost toward homeownership. It helps you put together a larger down payment, which can reduce your mortgage amount and monthly payments. Just remember: it’s important to balance the short-term benefit of homeownership with the long-term impact on your retirement savings. Next Steps Thinking about using the Home Buyers’ Plan? Let’s sit down and review whether it’s the right move for you. Together, we can create a strategy that gets you into your first home while keeping your future financial goals on track. 📞 Reach out anytime—it would be a pleasure to guide you through the process.

Employment and Mortgage Qualification: What Lenders Look For

By Katherine Martin • July 29, 2026
When you apply for a mortgage, your employment history and status carry a lot of weight. Even if you feel secure in your job, lenders need proof that your income is reliable and will continue. To them, your employment status is one of the strongest indicators of whether you can make your mortgage payments long term. Here’s how lenders typically view different employment situations: Permanent Employment This is the gold standard. Once you’ve passed any probationary period and hold permanent status, lenders see you as a lower risk. It shows that your employer is committed to you, and your income is steady. Probationary Periods If you’re still on probation—usually 3 to 6 months, though sometimes longer—lenders may hesitate. That’s because your employer can end your contract without cause during this period. Once probation is over, you’re considered more secure. That said, context matters. If you’ve worked with the same company for years as a contractor and just transitioned into full-time employment, lenders may accept a letter from your employer confirming that probation is waived. Documentation is key here. Parental Leave Being on or about to take parental leave doesn’t mean you can’t qualify for a mortgage. As long as you have a letter from your employer guaranteeing your position and return-to-work date, lenders can use your regular salary—not your leave income—when assessing your application. Term Contracts This is one of the trickiest categories. Even highly skilled professionals with strong incomes can face challenges here. A term contract has a start and end date, which makes lenders question the stability of your future income. To use term-contract income, lenders generally want to see at least two years of history, or proof that your contract has already been renewed. The more evidence you can show of consistent employment, the stronger your case will be. The Bottom Line If you’re planning to apply for a mortgage, it’s important to understand how your employment status could affect your approval. Whether you’re starting a new job, coming back from leave, or working under contract, lenders want documentation that proves your income is reliable. 📞 If you’ve recently changed jobs or are planning a career shift, let’s connect. I can help you prepare your file so you qualify with confidence and avoid surprises in the approval process.
© 2026 

Katherine Martin. All Rights Reserved.