Who does the new stress test affect?
The new stress test will affect borrowers who have less than 20% down payment (an insured mortgage).
What is the Current Stress Test?
The current stress test is 5.19%, which is based on the Big 6 Banks' Posted 5 year fixed rate.
What is the New Stress Test (Effective April 6th)?
The new stress test will be approximately 4.89%. This figure will be based on the weekly media 5 year fixed insured rate + 2%.
How much of the Market will be Affected?
As of 2018, the insured mortgage market is less than one third of new mortgages. OSFI has announced that they are considering changing the stress test for uninsured mortgages as well (uinsured mortgages are borrowers who have >20% equity). However, no details have been confirmed yet.
How much does the Stress Test Help our Average Buyer?
With the current stress test of 5.19%, a borrower who is approved for a mortgage of $500,000 will see a 4% increase in affordability, when being stress tested at ~4.89% instead. This means that with the new stress test, they will be able to borrower up to $520,000 instead of $500,000 (that is $20,000 more in mortgage money)!
How will the Stress Test Affect our Market?
With recent interest rates drops, the gap between the qualifying rate and contract rates are too high. For borrowers who have been sitting on the sideline due to tightening policies since 2018, may find themselves entering into the market as they seem some relief *The information above is taken from Cherry Cooper, Chief Economist of DLC and Steve Huebl from Canadian Mortgage Trends.
*The information above is taken from Cherry Cooper, Chief Economist of DLC and Steve Huebl from Canadian Mortgage Trends.
Any questions? Contact me at jessica.kuan@cleartrust.ca
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