New Qualification Standards
Canada’s banking regulator has proposed changes which would require borrowers applying for uninsured mortgages (typically those with more than a 20% down payment) to qualify at their mortgage contract rate plus two percentage points or 5.25%, whichever is higher.
Buying Power Changes
This will effectively reduce the buying-power of many purchasers, versus today’s rates. For example, if you currently qualified for a $1,000,000 mortgage, with the new qualifications, your maximum purchase would be reduced to $955,000. The stress test currently has a minimum qualifying rate of 4.79%, nearly 50 basis points lower.
There’s no word yet if changes to the insured mortgage stress test will be forthcoming - which would directly impact many first-time purchasers, who typically have higher-ratio (low down payment) mortgages. Final adjustments to the proposed changes will occur by May 24th, with the new rate implemented as of June 1st.
If you have been planning to make a purchase - it may be wise to start that process sooner than later!