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Changes to the mortgage stress test proposed for June 1

JENCOR

Changes to the mortgage stress test proposed for June 1


Today, Canada's banking regulator proposed raising the mortgage stress test benchmark for uninsured mortgages to 5.25% (or two percentage points above the mortgage contract rate, whichever is higher).


This change, proposed by the Office of the Superintendent of Financial Institutions (OSFI), only impacts homebuyers with a minimum 20% down payment, and would reduce their purchasing power by about 4-5%. 


The new measures are expected to come into effect on June 1, with the 5.25% rate replacing the current qualifying rate of 4.79%. While 4.79% remains the qualifying rate for insured mortgages, Dominion Lending Centre’s Chief Economist Dr. Sherry Cooper warns that “CMHC and the finance department could well follow OSFI's lead in tightening qualifying rules for insured loans.”


These measures are being considered amidst pressure to cool the red-hot housing market, but Dr. Cooper expects that the changes will cause “the current boom in home buying [to] accelerate further in the spring market,” as many buyers move their purchase decisions up into April or May to get in under the June 1 deadline.


OSFI is accepting comments on the proposed new mortgage qualifying rate by email to B.20@osfi-bsif.gc.ca until May 7, so there could be tweaks to the proposal before it is finalized. OSFI has indicated that it will announce the results of the consultation process on May 24. No matter what, we can expect that the stress test will become more restrictive as of June 1.


For more information about the OSFI proposal, visit: www.osfi-bsif.gc.ca/Eng/fi-if/in-ai/Pages/b20-let.aspx


To understand how this proposed change to the stress test might impact you, give me a call or reach out by email. I would be happy to assist you and my advice is always free! 


Croft Axsen
Broker Owner - Jencor Mortgage Corporation 



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