What are the Loan-to-Income (LTI) limits, and how do they impact lenders?
OSFI is introducing Loan-to-Income (LTI) limits on the uninsured mortgage portfolios of federally regulated financial institutions (FRFIs).
This aims to reduce the risks associated with high household debt. The limits apply to the portfolio as a whole, not individual mortgages. Exceeding these limits could mean a bank has to hold more capital, impacting its lending capacity. Here's a simplified view:
Key Points
These rules apply to your lender's overall lending, not just your individual mortgage application.
Lenders are expected to follow these new rules starting in early 2025.
The government will be watching lenders to make sure they follow these loan rules.
The government may change the mortgage stress test rules after these new loan limits are fully in place.
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Related Questions
How does the new OSFI guidance affect mortgage switching for you?
The latest OSFI guidance simplifies switching lenders at renewal for borrowers with existing uninsured mortgages.
What documentation is typically required for a mortgage application, and how might this differ for a 'straight switch'?
While specific requirements can vary slightly among lenders, the standard documentation confirms income, credit history, and property details.
How does 'stress testing' affect the stability of financial institutions?
Stress testing evaluates how a financial institution's mortgage portfolio would fare under tough economic times.
What exactly are GDS and TDS ratios, and how are they calculated?
Gross Debt Service (GDS) and Total Debt Service (TDS) ratios are vital metrics Federally Regulated Financial Institutions (FRFIs) use to assess a borrower's ability to manage debt.