New mortgage stress test may make it harder for you to buy a home
The Canadian real estate market has been red hot during the pandemic, and because of concerns that home buyers may be pushing their mortgage budgets too far, a new mortgage stress test has been put in place.
The rules came into effect on June 1, and the test is used to see if you can withstand increases in mortgage interest rates, and whether or not you’ll qualify to buy a new home.
Rob McLister with Rates.ca says this has made it tougher for some Canadians to buy a home.
“It gets harder to qualify for a mortgage for most people,” he says.
If you qualified under the old rate of 4.79 per cent to borrow $500,000, the new rate of 5.25 per cent reduces your borrowing power to $479,000.
"So that increase in the minimum qualifying rate of .46 percentage points is going to make it harder for people to get a mortgage for those who have a higher debt to income ratio," McLister says.
Leah Zlatkin with Brite Mortgage says some of her clients were scrambling to find a home the weekend before the test kicked in.
“The purpose of the stress test is to make sure people can afford things if interest rates go up,” she says. “I also did see a lot of clients reach out to get pre-approved before the rules came into effect.”
The change could have a big impact on first-time buyers who may not be able to compete in bidding wars because they’ll have almost five per cent less buying power.
“I do think there are a number of Canadians who are saying ‘Let’s see if the stress and those qualifying slows down,’ and maybe some of the prices will come with it,” says Pattie Lovett-Reid, CTV’s chief financial commentator.
And there are already signs the market is cooling. The Canadian Real Estate Association reported the number of homes changing hands fell 12 per cent from March to April.
With files from CTV News Toronto's Pat Foran
CTVNews.ca Top Stories
Expert warns of food consumption habits amid rising prices
A new survey by Dalhousie University's Agri-Food Analytics Lab asked Canadians about their food consumption habits amid rising prices.
Documents reveal Ottawa's efforts to get Loblaw, Walmart on board with grocery code
It was evident to the federal government as early as last fall that Loblaw and Walmart might be holdouts to the grocery code of conduct, jeopardizing the project's success.
opinion The special relationship between King Charles and the Princess of Wales
Royal commentator Afua Hagan writes that when King Charles recently admitted Catherine to the Order of the Companions of Honour, it not only made history, but it reinforced the strong bond between the King and his beloved daughter-in-law.
Charlie Woods, son of Tiger, shoots 81 in U.S. Open qualifier
Charlie Woods failed to advance in a U.S. Open local qualifying event Thursday, shooting a 9-over 81 at Legacy Golf & Tennis Club.
Improve balance and build core strength with this exercise
When it comes to cardiovascular fitness, you may tend to focus on activities that move you forward, such as walking, running and cycling.
'I just want to be safe': Ukrainian man in Canada faces limbo amid consular freeze
A recent decision to restrict consular services for fighting-aged Ukrainian men has made a Ukrainian man in Canada feel less certain of his next steps — and worried he could be pulled back to the war.
B.C. tenants evicted for landlord's use after refusing large rent increase to take over neighbouring suite
Ashley Dickey and her mother rented part of the same Coquitlam duplex in three different decades under three different landlords.
Mountain guide dies after falling into a crevasse in Banff National Park
A man who fell into a crevasse while leading a backcountry ski group deep in the Canadian Rockies has died.
Dozens of U.S. deaths reveal risks of injecting sedatives into people restrained by police
The practice of giving sedatives to people detained by police has spread quietly across the U.S. over the last 15 years, built on questionable science and backed by police-aligned experts, an investigation led by The Associated Press has found.