Mortgage “Stress Test” rate increased

The Bank of Canada has increased it’s qualifying “stress test” rate by 20 basis points to 5.34% from 5.14%.  The “stress test” was put into effect to ensure you can afford your mortgage in the current rising rate environment. What does this mean for you?

Purchasers

If you’re purchasing a home with less than 20% down-payment, you must qualify at the 5.34% rate.  If you are purchasing a home with more than 20% down payment, you must qualify at the greater of the qualifying rate (5.34%) or the contract rate plus 2%.

Mortgage rates are already on the rise so this extra hurdle will only further diminish purchasing power.  First time homebuyers are really going to feel the effects of the increased stress test rate.  Read more here >>

Renewals

If you’re coming up for renewal and need to refinance or transfer your mortgage, you’ll have to re-qualify at the greater of the 5.34% rate or the contract rate plus 2%.  You can avoid the “stress test” by renewing direct with your current lender.   However, lenders are aware you may not be able to qualify elsewhere so they are not as motivated to give you the best rate on renewal.  Read more here >>

Can I avoid the Stress Test?

The good news is we have access to Credit Unions and Private Lenders who are provincially regulated and don’t need to abide by the same rules as other Financial Institutions.  We are able to go to these lenders and qualify you at their contract rate.  Want to find out more?