How the new mortgage ‘stress test’ will affect homebuyers

The new stress test was announced by the Office of the Superintendent of Financial Institutions on May 20.

According to lowestrates.ca, the current lowest five-year fixed mortgage is 1.69 per cent as of Tuesday afternoon.

Let’s say a home buyer hopes to get qualified for a mortgage with a rate of 1.69 per cent in order to buy a $716,828 home.

But given that 1.69 plus two per cent is less than 5.25, the borrower would be stress tested against a 5.25 per cent interest rate.

Prior to June 1, this borrower would have been tested against the Bank of Canada’s five-year average conventional mortgage rate, which was 4.79 per cent as of last Wednesday.

While interest rates are currently at record lows as a result of the pandemic, they’re not guaranteed to stay that way over the long term.

…Read the full story