Updated: Monday, November 20, 2023

Since July 1, 2020, it has become increasingly more difficult for first-time home buyers to buy a home in Canada.

In 2020, Canada Mortgage and Housing (CMHC) began tightening lending standards:

  • maximum gross debt service (GDS) ratio drops to 35 from 39;
  • maximum total debt service (TDS) ratio drops to 42 from 44;
  • minimum credit score rises from to 680 from 600; and   
  • non-traditional sources of down payment that increase indebtedness are no longer treated as equity for insurance purposes.

CMHC changed its underwriting policies because COVID-19 exposed long-standing vulnerabilities in financial markets.

How tightening standards affect home buyers?

The change reduced the number of homebuyers to qualify for a mortgage by about five per cent.

For qualifying homebuyers, it reduced their buying power. Home buyers can borrow about 10 per cent less than before the change.

A household earning $195,000 with a 20 per cent down payment would currently qualify for a mortgage of $633,000 including mortgage insurance. (Total home price is $770,200) Before the stricter rules, this household buying a $770,200 house, with the same mortgage rate and downpayment, would qualify for a mortgage with an income of $175,000. 

Monthly payments for Gross Debt Service
Notes: Price, October 31, 2023, REBGV. P&I based on 80% loan, 25-year amortization, 7.75% 5-year stress test mortgage rate. Property taxes. Condo fee at 50% of actual. Taxes, heat and condo fee estimated.
  Benchmark price  Principal and interest  Property taxes  Heat and condo fee  Total monthly payment
Detached $2,001,400 $11,966 $850 $400 $13,216
Attached $1,100,500 $6,579 $500 $550 $7,629
Apartment $770,200 $4,734 $350 $650 $5,734
Comparison of gross annual income under GDS ratio change
Note: Based on monthly payment calculations in GDS table.
  Former GDS ratio
 Gross annual income New GDS ratio Gross annual income Income difference
Detached 39 $408,136 35 $452,552 $44,416
Attached 39 $233,476 35 $260,158 $26,682
Apartment 39 $175,524 35 $195,584 $20,060
Gross Debt Service ratio

Principal + interest + taxes + heat / gross annual income.

Total Debt Service ratio

Principal + interest + taxes + heat + other debt obligations / gross annual income.