Sutton Showplace Realty (2015) Chilliwack

  604-858-1800 

Mortgage stress test rules get more lenient for first time since B-20 intro

22 July 2019
Sutton Showplace Realty Chilliwack

For the first time since the government implemented new stress test rules on Canadian home loans, the bar has been lowered — meaning a would-be home buyer could be approved for a bigger mortgage today than they would have yesterday.

The so-called stress test, formally in place since January 2018, is a financial bar that any Canadian looking to take out a mortgage must pass to be approved for one. Regardless of what deals they may have been offered by a lender in the real world, for regulators to sign off on the loan, the borrower's finances must be tested as though their mortgage rate is at a higher level. The idea is to save borrowers from biting off more debt than they can chew and ensure they have some financial wiggle room if rates rise.

The stress-test level is set at either two percentage points above the actual mortgage rate or whatever the average five-year posted rate is at Canada's big banks, as calculated by the Bank of Canada — whichever is higher.

That bank rate hasn't changed since May 2018, when it rose to 5.34 per cent. But this week, it inched down to 5.19 per cent, the first time it has decreased in almost three years.

Read the remainder of the article here: https://www.cbc.ca/news/business/mortgages-stress-test-rate-1.5217790?fbclid=IwAR1g7QxS0_fbc1Di8uApI2svDCLrPheC25Xeli9N2PpOXwOPNGA2JyxXaUY