NEW MORTGAGE STRESS TEST RESTRICTION IN PLACE AS OF JUNE 1
The Office of the Superintendent of Financial Institutions (OSFI) has announced that the higher mortgage stress test proposed in April will, in fact, come into effect on June 1. (https://bit.ly/2RQ1v90) Those applying for uninsured mortgages have to show they can afford to pay an interest rate of minimum 5.25 per cent. Currently, that number is 4.79 per cent. The new regulation on June 1 means those who have at least 20 per cent down so do not need to pay mortgage insurance must meet the higher criterion to have their loans approved – regardless of the rate their financial institution offers. In addition, because borrowers who have lower down payments and are looking for insured mortgages will be held to the new standard.
It is important to look at this step in the correct context. Here in Canada, our conservative banking practices have kept us from tanking the way the U.S. market did a few years ago. The goal is to avoid buyers being unable to make payments when rates rise – and that will happen. The rise in the minimum rate for approval will limit what you can borrow a bit. This means that if you are thinking of buying, save as much as you possibly can toward your down payment, and do the best you can to improve your credit score. Owning a home or condo will be one of the best things you ever do for your future!