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
Work stoppage possible as WestJet issues lockout notice to maintenance engineers' union
A lockout notice issued by WestJet to a union representing aircraft maintenance engineers could result in a work stoppage next week.
'I just can't believe that it took so long': Body found in wreckage 3 months after deadly fire
A man accused of arson in a January Old Strathcona apartment fire is expected to be charged with manslaughter after a body was discovered in the burned building late last month.
No proof man lied to brother about number of kittens born in litter, B.C. tribunal rules
A man was denied a $5,000 payout from his brother after a B.C. tribunal dismissed his claim disputing how many kittens were born in a litter.
Bodies recovered in Mexico likely 2 Australians, 1 American who went missing: officials
Three bodies recovered in an area of Baja California are likely to be those of the two Australians and an American who went missing last weekend during a camping and surfing trip, the state prosecutor’s office said Saturday.
BREAKING London Drugs begins 'gradual reopening' on 7th day after cyberattack
Almost a week after all London Drugs stores across Western Canada abruptly closed amid a cyberattack, they began a "gradual reopening" on Saturday.
Quebec police hand out hundreds of tickets to Hells Angels and other bikers before 'first run' meeting
Quebec provincial police handed out hundreds of fines to Hells Angels members and other supporting motorcycle clubs who met for their 'first run' in a small town near Sherbrooke, Que.
Auston Matthews skates ahead of Game 7, status unclear with season on the line
Auston Matthews was back on the ice with his teammates Saturday.
Russia puts Ukrainian President Zelenskyy on its wanted list
Russia has put Ukrainian President Volodymyr Zelenskyy on its wanted list, Russian state media reported Saturday, citing the interior ministry’s database.
Snakes almost on a plane: U.S. TSA discovers a bag with small snakes in passenger's pants
According to an X post by the Transportation Security Administration, officers at the Miami International Airport found the small bag of snakes hidden in a passenger's trousers on April 26 at a checkpoint.