How Do the Stress Test Changes Affect Homebuyers?


If you plan on buying a home after June 1st, will you still be able to qualify? 

Homebuyers and investors have wondered what the changes to the Stress Test mean for their future real estate plans. 

According to CBC News, Canada's top banking regulator is considering raising the mortgage stress test.  5.25% or two percentage points above the market rate (whichever is higher). 

Why now, and what does that mean for you?

It comes down to this; Buyers will have their finances tested to ensure they can cover their mortgage, should there be an increase in rates. 

It's no secret that mortgage rates are at an all-time low. Implementing this would ensure you are not forced into selling your home if the rates rise and that the banks can count on continuous payments. 

To break it down, let's look at what buying a home before June 1st and after June 1st, with a 20% down payment, looks like at the $1,000,000 price point. 

The average current rate that lenders are offering is roughly 2.65%. If you're comparing rates online, it'll tell you that you only need to make monthly payments of $3,649 for your mortgage. 

But, if your mortgage is uninsured, you already have to measure up against the stress test.

The current minimum on the stress test qualifying rate is 4.79%, showing you'll need to prove you can make a monthly payment of $4,579/month. 

After June 1st, to buy a $1,000,000 home, you'll need to test against the new rate - 5.25% (or 2 points above what your lender is offering). This means buyers have to prove they can pay $4,793/month instead. 

That's a $1,144/month difference compared to what you'll need to pay vs what you need to prove you can pay. 

The stress test surge will decrease your buying power, but not by much more than you would have already had to qualify. If you look at the numbers between the stress test today and the stress test after June 1st at this price point, the difference is $214 per month.  This could make or break a buyer’s realistic price range if the current test already demonstrated a close call. 

When you’re working with an experienced Realtor, they advise their buyers of different options that can meet their neighbourhood, home, and budget needs within the perimeters of this test.

That's a lot of information to process. Everyone's situation is unique. I would love to help you create a roadmap to your real estate goals to see what that looks like before or after June 1st if that impacts your decision. 

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I hope that you found this blog helpful and informative. If you have any questions about the stress test, please feel free to reach out by clicking here! I can answer all your questions and concerns and make the whole process as easy as possible