New Mortgage Stress Test Playing Hard to Get
New rules could require applicants to qualify for interest rates 2 percentage points higher than the contract rate. Tim Walker, Mortgage specialist explains…
The Office of the Superintendent of Financial Institutions (OFSI) is still determining how hard it will be to qualify for a mortgage in Canada in order to reduce the risk of mortgage defaults. If OFSI has its way, it will be much harder.
“We clearly see the potential risks caused by high household indebtedness across Canada, and by high real estate prices in some markets,” Jeremy Rudin, the head of OFSI, said this last week. “We are not waiting to see those risks crystallize in rising arrears and defaults before we act.”
Until now, if you had 20 percent down payment or more, you were in the clear to receive a mortgage. The proposed stress test would require these borrowers to qualify at an interest rate of two percentage points above their contract rate.
Tim L. Walker, Mortgage Agent with Anthem Mortgage Group. continued to explain,
“The proposed stress test for conventional mortgages that OFSI is expected to reveal later this fall will be similar to the stress test released a year ago for insured mortgages, but instead focuses on conventional mortgages (which make up about 80% of the mortgages in Canada).
With four out of five mortgages in Canada affected by this potential change, conventional buyers could be looking at a reduction in purchasing power by around 18%.
If you’re able to afford a $500,000 mortgage currently, once this new stress test is put into place, that brings your purchasing power down to just around $410,000.”
To find out how this proposed mortgage change would impact you, download the number one mortgage app in Canada
Continue Reading: Mortgage App Features