A New Conventional Stress Test Coming Soon

In hopes of calming the current housing market and assist financial stability for households. Canada’s banking regulator has proposed changes to strengthen the stress test applied to uninsured mortgages. ?

What does this mean for you?

It will affect Homebuyers with at least a 20% down payment who will be refinancing with at least 20% equity in their home. (No word yet on if uninsured mortgages will be affected – those who have less than a 20% deposit, usually first-time homebuyers)

Once put in effect, homebuyers who were looking into purchasing a home will now have to qualify at their mortgage contract rate plus 2% or 5.25% whichever is higher.

Thus bringing purchase power down by 4-6% ?

At this time the percentage is only a proposal and dependent on the housing market conditions across the country.?

If this does come into effect, the new stress test is going to cause increased activity prior to June 1st as people rush to purchase before the rate change. It also means that it could cause a trickle-down effect, having homeowners who already purchased buying more of the lower-priced homes, essentially pricing first-time homebuyers out of the market. 

Have your say! The OSFI will use any public feedback received and any final amendments to influence the final qualifying rate by May 24, 2021, prior to the new stress test taking effect on June 1, 2021. ? 

So don’t be shy, email your thoughts to B.20@osfi-bsif.gc.ca, by May 7, 2021.