How Does the New “Stress Test” for Mortgages affect me?

What is the “stress test”?

At the beginning of the month, Ottawa released the news that they would be introducing some new measures to make it harder for Canadians to take on a mortgage they can’t afford. On October 17^th, 2016, the federal government’s new rules for first-time homebuyers take effect.

Now all insured mortgage applicants putting down less than 20% of the home up front must pass a stress-test to determine whether or not they can afford to pay back a loan if interest rates rise or their personal financial situation changes. The test will judge borrowers against the five-year standard rate of 4.64 percent for a five-year loan.

If you are buying a home, these new regulations may affect you.

Why was it instated?

The federal government hopes to reduce the rising debt loads held by Canadians.

“Across the country, many middle-class families looking to buy their first home see prices climbing often out of their reach. Some are taking on high levels of debt in a rush to buy before it’s too late,” said Finance Minister Bill Morneau on October 3rd.

Experts say the new regulations will have a cooling effect on the market, but also reduce debt held by Canadians.

 

If you have any questions, please feel free to contact our friendly staff at Silver Law at 604-986-2522.