Tighter Rules on Mortgage Stress Test Confirmed

On May 20, 2021 the Office of the Superintendent of Financial Institutions (OSFI) announced that tighter rules were being applied to the mortgage stress test. The mortgage stress test is a gauge of whether borrowers can handle payments should interest rates increase.

Specifically, OSFI ruled that the minimum qualifying rate for uninsured mortgages (those with 20% or greater down payments) would be increased to the greater of a 5.25% interest rate or the contract rate plus 2%. This becomes effective June 1, 2021.

The current mortgage stress test is set at the Bank of Canada’s 5 year rate (4.79%) or the contract rate plus 2%.

Link to full OSFI report: 

https://www.osfi-bsif.gc.ca/Eng/osfi-bsif/med/Pages/b20nr-0521.aspx 

Shortly after OSFI’s statement the Ministry of Finance released their statement stating …“With today’s official confirmation from OSFI of the new minimum qualifying rate for uninsured mortgages, the federal government will align with OSFI by establishing a new minimum qualifying rate for insured mortgages, subject to review and periodic adjustment, which will be the greater of the borrower’s mortgage contract rate plus 2 per cent, or 5.25 per cent. This will apply to insured mortgages approved on June 1, 2021, or later.” 

To read the full article by the Minister of Finance: https://www.canada.ca/en/department-finance/news/2021/05/statement-by-the-deputy-prime-minister-and-minister-of-finance-on-the-canadian-housing-market.html 

It is more likely than not that these new rules will make it harder to qualify for a mortgage especially for the first-time homebuyer.