[2021] New Mortgage Stress Test Rules

Canada's mortgage 'stress test' is getting tougher. As of June 1, 2021, the qualifying rate is moving from 4.79% to 5.25%.

We can help you de-stress. Our expert, friendly brokers are here to answer your questions, and guide you to your best rate and right mortgage fit.

What is the mortgage stress test?

Thinking of purchasing, renewing or refinancing your home? Regulated lenders determine how much you can borrow using a rate set by the federal government. The rate is set higher (currently much higher) than rates being offered by lenders. This buffer means consumers should be able to continue to pay their mortgage if rates go up. On June 1, the rate set by the federal government will jump nearly 1/2 a percent to 5.25%. The benchmark rate is reviewed annually in December, so it may change again by the end of the year.

Why a stress test?

The official stated purpose for the stress test is to protect consumers and financial institutions from trouble when mortgage rates rise in future.

“The minimum qualifying rate adds a margin of safety that ensures borrowers will have the ability to make mortgage payments in the event of change in circumstances, such as the reduction of income or a rise in mortgage interest rates. As mortgages are one of the largest exposures that most banks carry, ensuring that borrowers are able to repay their loans strongly contributes to the continued safety and soundness of Canada’s financial system.”

- Office of the Superintendent of Financial Institutions (OSFI)

Right now, housing markets across Canada, highlighted by Vancouver and Toronto, are problematically hot. The pandemic has lowered mortgage rates to historic lows, resulting in a big chunk of discretionary consumer spending to be slated for housing. And, spending so much time at home, many Canadians see this as the time to either purchase a home or move into something bigger or more comfortable. As a result, home prices have skyrocketed. This program offers a convenient mechanism that the government can use to turn down the heat.

How does it impact you?

Here it is, in a nutshell. Home buyers can now get approved for less home than they would have been prior to June 1, 2021. Alone, this rate change wouldn’t have had a huge impact (around 4% - 5% reduction in mortgage affordability), but combined with rising prices — Canadians on the cusp of being able to afford a certain home may see desirable options disappear.

Are you a first-time home buyer? We can help.

Here are some quick comparison scenarios.

See our chart, plus our affordability calculator below has been updated with the 5.25% qualifying rate.

**Please note: These scenarios and those produced by our calculator are highly simplified, and are a merely a snapshot of the June 1, 2021 stress test regulations. These examples will quickly become out of date.

Always consult an expert for tailored advice. We're standing by to answer any questions. Click the chat bubble, or connect with us today.

Heating $100/mo $100/mo $100/mo P r ope r t y T a x e s $2800/yr $4000/yr $6500/yr Income $68,000/yr $110,000/yr $180,000/yr C ar L oan $225/mo $400/mo $ 7 00 /mo Credit Card $1800 $2500 $4500 Down Payment $35,000 $50,000 $90,000 $965K $915K $580K $555K $350K $335K

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