As you may have heard last week, our banking regulator (OSFI) announced proposed changes to the mortgage stress test. The “proposal” is a mere formality, I fully expect these changes to come into effect, and soon. Below I’ll break down the changes and how it will affect you. 

Wait, what is the Stress Test?

• It’s a qualifying rate that is used when determining a maximum ability to borrow. 

• It’s in place to ensure borrowers can still afford their mortgage even if rates were to rise in the future. 

• You don’t have to pay this rate, you just need to show you can!

• Currently, the stress test is at a rate of 4.79%. 

What is the new proposal changing?

• Increase the stress test from 4.79% to 5.25%.

• Or the greater of the contract rate (the rate you pay) plus 2.00% - This is already in place for our current stress test. 

Who does it impact?

• Purchases over $1,000,000.

• 30 year amortizations.

• Refinances.

• Rental Properties. 

Under the current proposal, insured mortgages (with less than 20% down) are NOT affected by the proposed rule change. This could change in the future though. 

How much will this impact you?

• 5% decrease in overall borrowing power.

• $5,000 less per $100,000 borrowed. 

• $3,100 less mortgage per $10,000 in income. 

*All information estimated, contact me to verify your specific changes. 

When will it take effect?

• If approved on May 7th, the changes will take effect for all mortgage approvals on or after June 1st.

• I fully expect this change to be approved. 

What can you do to mitigate the change? 

• Secure an approval or pre-approval prior to June 1st.

  1. OSFI confirmed that applications approved prior to June 1st will use the current rules as long as they close within the contract window (typically 120 days

Contact me with any questions on these changes, or anything else mortgage related.