By Sheryl Smolkin

Major changes to the mortgage rules announced by Finance Minister Bill Morneau in early October have both existing homeowners and people planning to buy a home for the first time scratching their heads. They are wondering precisely what the changes are and how they will be personally impacted.

Here are some blogs and media articles that may answer some of their questions (and yours).

In his blog Dave the Mortgage Planner, Dave Larock presents a three- part look at the new mortgage reality:

Part 1 looks at changes effective October 17^th.  Beginning on that date all insured mortgage applications will be underwritten using the Bank of Canada’s Mortgage Qualifying Rate (MQR). As of the date the blog was written  the MQR was set at 4.64%, which is about double what you would actually pay for a market five-year variable-rate mortgage, and that gap helps ensure that the borrowers most vulnerable to rate rises can afford higher payments when the time comes.

Part 2 covers additional rule changes that will take place November 30^th. Until now, the rules for insuring low-ratio mortgages have been more lenient than those used for high-ratio mortgages, in recognition of the fact that low-ratio loans have more paid-in equity, which makes them inherently less risky. But after November 30, the qualifying rules used to underwrite portfolio-insured low-ratio loans will be the same as those that are used to underwrite insured high-ratio loans.

Part 3 explains why Dave believes these changes are necessary, and who the winners and losers are in the new world of mortgages. For example, he says Canadian home owners in hot markets, where property values are better protected when lending standards are raised and household debt accumulation slows are winners. However losers include high-ratio borrowers, who just saw the rate that lenders use to qualify them for a five-year fixed-rate (which most of them are choosing) more than double.

In a CTV News story, Meredith McLeod reports that until now, buyers with more than a 20% down payment opting for mortgage insurance have escaped stress testing. They were able to obtain low-ratio insurance sold through two private insurers, but backed by the federal government, subject to a 10% deductible. Starting Nov.30, new criteria for low-ratio insurance will take effect. To qualify, the mortgage’s amortization period must be 25 years or less, the purchase price be less than $1 million, the property has to be owner-occupied, and the buyer must have a credit score of 600 or more.

While the new mortgage rules respond to legitimate concerns about escalating home prices in the red-hot Toronto and Vancouver real estate markets, it is still unclear how they will impact smaller cities and towns in other provinces where prices are more stable, or in some cases even dropping. Todd Kristoff, a Regina mortgage broker told CBC there has already been a correction of roughly five percent over the last several years in Saskatchewan and therefore the changes are not necessarily needed in this province.

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