Exciting changes to the "Stress Test"

The Government of Canada has announced that the on April 6, 2020 the Stress Test will be revised to make qualifying for a mortgage a reality for more Canadians. To qualify for a mortgage loan in Canada, homebuyers need to pass a “stress test” to prove they can afford payments at a qualifying interest rate which is typically higher than the actual rate in their mortgage contract. The government implemented this measure to ensure that Canadians can afford their mortgage payments if interest rates were to rise in the future. Today we have to qualify clients at the benchmark rate of 5.19%, regardless of their contract rate.

​The changes will mean that instead of using 5.19% to qualify clients, I will be able to use a weekly median rate plus 2.00%. So let’s say the weekly median rate was set at 2.85% today, we would use 4.85% as the qualifying rate which is 34 basis points less than the old qualifying rate (5.19%). 34 basis points is a massive difference that will make the debt servicing ratios much more reasonable. Every other week I see situations where clients can debt service the real contract rate on a mortgage amount, but don’t pass the stress test at that same mortgage amount. In these scenarios we reduce the purchase price they would be approved for.

Please reach out if you want me to walk you through the process, let's get you into a house!

Government of Canada Announcement
https://www.canada.ca/en/department-finance/news/2020/02/minister-morneau-announces-new-benchmark-rate-for-qualifying-insured-mortgages.html
 
OSFI Announcement
https://www.osfi-bsif.gc.ca/Eng/fi-if/in-ai/Pages/bnchrt-let.aspx