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
Widow looking for answers after Quebec man dies in Texas Ironman competition
The widow of a Quebec man who died competing in an Ironman competition is looking for answers.
Amid concerns over 'collateral damage' Trudeau, Freeland defend capital gains tax change
Facing pushback from physicians and businesspeople over the coming increase to the capital gains inclusion rate, Prime Minister Justin Trudeau and his deputy Chrystia Freeland are standing by their plan to target Canada's highest earners.
Tom Mulcair: Park littered with trash after 'pilot project' is perfect symbol of Trudeau governance
Former NDP leader Tom Mulcair says that what's happening now in a trash-littered federal park in Quebec is a perfect metaphor for how the Trudeau government runs things.
Wildfire southwest of Peace River spurs evacuation order
People living near a wildfire burning about 15 kilometres southwest of Peace River are being told to evacuate their homes.
World seeing near breakdown of international law amid wars in Gaza and Ukraine, Amnesty says
The world is seeing a near breakdown of international law amid flagrant rule-breaking in Gaza and Ukraine, multiplying armed conflicts, the rise of authoritarianism and huge rights violations in Sudan, Ethiopia and Myanmar, Amnesty International warned Wednesday as it published its annual report.
Train derailed in Sarnia after colliding with a truck
Police are investigating after a transport truck collided with a train in Sarnia.
Fewer medical students going into family medicine contributing to doctor shortage
As some family doctors are retiring and others are moving away from family medicine, there are fewer medical students to take their place.
'It's discriminatory': Individuals refused entry to Ontario legislature for wearing keffiyeh
Individuals being barred from entering Ontario’s legislature while wearing a keffiyeh say the garment is part of their cultural identity— and the only ones making it political are the politicians banning it.
Bodies found by U.S. authorities searching for missing B.C. kayakers
United States authorities who have been searching for a pair of missing kayakers from British Columbia since the weekend have recovered two bodies in the nearby San Juan Islands of Washington state.