New Mortgage Stress Test Rules Start June 1st

Kim PhillipsReal Estate

For many Canadians, buying a home represents the most significant financial investment they will ever make. However, the dream of homeownership is becoming increasingly out of reach due to soaring housing prices, affecting middle-class citizens nationwide and prompting concerns about market stability.

In response to these market conditions, starting on June 1st, 2021, the Office of the Superintendent of Financial Institutions (OSFI) will implement a new minimum qualifying rate for all uninsured mortgages. This decision follows a period of consultation on a proposal made in April.

OSFI has determined that the minimum qualifying rate for uninsured mortgages will be either the mortgage contract rate plus 2 percent or 5.25 percent, whichever is higher. This amendment to the mortgage “stress test” aims to temper the heated housing market. While these revisions might tighten mortgage qualification in the near term, their long-term goal is to stabilize the market, making homeownership more sustainable and accessible.

“It is vitally important that homeownership remain within reach for Canadians,” Finance Minister Chrystia Freeland said in a statement. 

If you are currently looking to buy a home, you should confirm your mortgage pre-approval prior to June 1 as OSFI will allow lenders, at their discretion, to grandfather the current stress test rate. This also applies to individuals who already purchased a home and anyone looking to refinance.

“Rosa-Anna DeMichina of Dominion Lending suggests that for those who have already secured mortgage pre-approval, the best course of action is to reach out directly to their bank to confirm the status of their pre-approval. With the new regulations set to take effect on June 1st, it’s possible that some lenders might not honor pre-approvals made before the implementation date. Given the timing of the announcement just before a long weekend, there’s a degree of uncertainty, and it’s advisable for clients to check in with their lenders for precise information on how their pre-approval might be affected.”

These changes will benefit Canadians in the long run and will bring more stability and affordability in the housing market. If you are hoping to meet the June 1st deadline, we recommend you speak with your bank today for more information.

If you have any questions regarding the current housing market, our dedicated and experienced team are here to help. If you are looking for a mortgage broker, email us at [email protected] and we are happy to offer our recommendations of qualified brokers in the Lower Mainland.