New Stress Test Proposal

Last week OFSI, the bank regulator proposed a tougher Stress test for mortgages that if approved will start June 1^st.

They are proposing to increase the minimum qualifying rate from 4.79% to 5.25%.  So even if your mortgage rate is 2% for example the bank will have to qualify you at 5.25% so you will qualify for less of a mortgage on June 1^st.

We have calculated the loss of affordability at about 5% .  This means if you quality for a mortgage now for 1 million dollars, you will only qualify for a $950,000 mortgage after June 1^st.

So far this proposed change is only for non-CHMC mortgages so this applies to mortgages for refinancing your existing home or for mortgages when you buy with a 20% down payment or more.  We do not know if the stress test will change for CMHC mortgages yet.

The reason for this proposed change is to cool the housing market and make lending safer for banks in case of an economic downturn.

If you are looking to buy or refinance, you should do so before June 1^st when it becomes harder to quality for mortgage.

Contact us for more information and we will be happy to help!