How The New Stress Test Effects Buyers

Posted by Nutan Brown on Wednesday, June 23rd, 2021 at 12:17pm.

A new mortgage stress test was put into effect earlier this month in an attempt to cool down the red hot Canadian housing market.

After record low interest rates during the pandemic, the new stress test aims to protect buyers who may struggle to make their mortgage payments if interest rates increase in the future.

The new minimum qualifying rate for uninsured mortgages has been raised to 5.25%, an increase of about half a percentage point from where it was before.

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This will reduce the buying power for some Canadian home buyers.

For example, if you qualified for $500,000 under the previous minimum qualifying rate of 4.79%, that amount is reduced to $479,000 under the new qualifying rate.

The increase will make it harder for people to get a mortgage who have a higher debt to income ratio.

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These changes have the biggest impact on first-time homebuyers, who’ve had to take part in bidding wars to get their dream home.

The new rules currently only apply to uninsured mortgages. The Department of Finance says it is working to apply the same rules to insured mortgages in the future.

If you have any questions about the new mortgage stress test, and how it might affect you, contact me for some professional guidance.

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