The New Mortgage Stress Test Rules

As of June 1, 2021, Canadian homebuyers are facing tougher mortgage stress test rules. These new rules will decrease the buying power of most borrowers.

Who is affected by the new rules?

The new mortgage stress tests will affect Canadian “uninsured buyers” applying for or renewing a mortgage.

Before June 1, 2021, “uninsured buyers” (that is, buyers whose down payment was 20 per cent of the purchase price or more) were required to demonstrate to a Lender that they could afford mortgage payments based on an interest rate of either 2% higher than the bank’s prime rate, or 4.79% (whichever is greater).

As of June 1, 2021, uninsured buyers are required to demonstrate to a Lender that they could afford mortgage payments based on an interest rate of either 2% higher than the bank’s prime rate, or 5.25% (whichever is greater).

How will this impact Buyers?

Ultimately, it will decrease the buying power of most borrowers. Financial and mortgage experts have determined that as a result of the new rules, buyers will see their borrowing power reduced by about five per cent.