Changes to the Canadian mortgage stress test effective June 1

In the financial world, a stress test is simply planning for the worst-case scenario. The mortgage stress test is in place to help determine how you would cope with your mortgage payments if interest rates were to rise or your financial situation were to change unexpectedly. 

As of June 1st, the stress test will be increased to 5.25%, up from 4.79%, when the stress test was first introduced in 2017. The Office of the Superintendent of Financial Institutions (OSFI) initially announced that the new qualifying rate is only for uninsured mortgages, those with 20% or more down payment. The Department of Finance quickly followed the lead set by OSFI and applied that higher qualifying rate to insured mortgages as well, or those with less than 20% down. This means all potential homeowners will now need to prove they can afford their mortgages, as lenders are restricting loans based on the 5.25% test rate. On average it will decrease affordability by 4% - 4.5% and most likely have a greater impact on first-time home buyers. 

“In a complicated and sometimes volatile housing market, the need for sound mortgage underwriting cannot be underestimated. The rate in place as of June 1, 2021 will help support financial resilience should economic circumstances change, while our commitment to review the qualifying rate at least annually will contribute to continued confidence in the Canadian financial system,” says Ben Gully, Assistant Superintendent, Regulation.

It's important to note that the new stress test will only impact buyers who purchase on or after June 1st. If you purchased a property before June 1st, lenders will qualify you on 4.79%. However, lenders will not be grandfathering in any existing pre-approvals, so if you are purchasing on or after June 1st, you will need to speak with your Mortgage Broker or bank to see how the new qualifications affect your buying power.

This is a proactive move by the government to help protect home buyers from the rising prices throughout Canada’s real estate market. Please don’t hesitate to reach out to your Mortgage Broker or bank for information on how this change may affect you and what options are available.

Additional Reading:

Insured and uninsured mortgage stress test changes confirmed for June 1

Statement by the Deputy Prime Minister and Minister of Finance on the Canadian housing market

Connect with us if you have any questions about the new stress test and we can happily refer you to our preferred Mortgage Broker.


Suzanne Lewis,
SALES REPRESENTATIVE

Keller Williams Advantage Realty
Call or text 416.856.1937
suzanne@suzannelewis.ca
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