The so-called ‘mortgage stress test’ rate for uninsured borrowers is going up on Tuesday.
The move, announced last month by the Office of the Superintendent of Financial Institutions (OSFI), was deemed necessary to cool Canada’s overheated housing market.
The minimum qualifying rate for uninsured mortgages (residential mortgages with a down payment of 20 per cent or more) will now be the greater of the mortgage contract rate plus 2 per cent or 5.25 per cent on June 1.
The current threshold is 4.79 per cent, which is based on posted rates of Canada’s six largest lenders.
Jeremy Rudin, OSFI superintendent, said increasing the qualifying interest rate would add a margin of safety to the system and is “more important than ever.”
For home buyers, it means that even if you can get a mortgage rate for a lot less, you will be tested at the higher rate of 5.25 per cent.
“In a complicated and sometimes volatile housing market, the need for sound mortgage underwriting cannot be underestimated,” said Ben Gully, Assistant Superintendent, Regulation.
Canada’s housing market has blown up over the past year with re-sale home prices up 17 per cent.
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.
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