Here’s why qualifying for a home loan could become more challenging

Canada’s top banking regulator wants to increase the so-called ‘mortgage stress test’ for uninsured borrowers, a move that could help stabilize the housing market.

The Office of the Superintendent of Financial Institutions (OSFI) wants to increase the minimum floor of the qualifying rate to 5.25 per cent, or two percentage points above the market rate, whichever is higher.

It means that even though borrowers can get a mortgage rate for a lot less, they will be tested at the higher rate of 5.25 per cent.

The current threshold is 4.79 per cent, which is based on posted rates of Canada’s six largest lenders.

“Sound residential mortgage underwriting is always important for the safety and stability of financial institutions,” Jeremy Rudin, OSFI superintendent, said in a statement Thursday. “Today it is more important than ever.”

Average price of a Barrie home grew 35 per cent since last year

Rudin said increasing the qualifying interest rate would add a margin of safety to the system.

Canada’s housing market has blown up over the past 12 months. The Canadian Real Estate Association says prices are up 17 per cent nationally during that time.

In the first quarter of 2021, home sales have doubled in Barrie and right across Simcoe County.

In Barrie, housing prices grew to an average $708,801 across the first quarter of 2021, which is a 35 per cent increase over housing prices noted in 2020.