The Office of the Superintendent of Financial Institutions (OSFI) implemented a change to the mortgage stress test. As of June 1, 2021 borrowers have to qualify at the greater of the lenders contract rate or 5.25%. Prior to June 1st, the rate was 4.79%. This will affect borrowers affordability by about 5%, meaning they will afford about 5% less. The increased stress test rate will reduce everybody’s affordability, but it will have the greatest affect on first time buyers.
How will you be affected if you’re purchasing?
In most cases, even if you had a pre-approval certificate prior to June 1st, the new rules apply to you. You will have to qualify at the greater of your contract rate (the rate the lender gives you) or 5.25%. This may affect your purchasing power by around 5%, meaning you would qualify for approximately 5% less than what you qualified for before the change. If there was a pre-approval and firm purchase agreement in place prior to June 1st, the old rules would apply. If you want more details on how this might affect you please contact us today 519-743-4365.
What does the new mortgage stress test mean if you’re a first time home buyer?
If you are a first time buyer that is already at your maximum affordability, unfortunately this change will hit you the hardest. You will qualify for approximately 5% less than you did before the change. If you want more details on how this might affect you please contact us today 519-743-4365.