New mortgage stress test rules are coming June 1


The country’s federal banking regulator is tightening rules on mortgage stress tests for homebuyers with uninsured mortgages starting June 1.

The minimum qualifying rate for uninsured mortgages – residential mortgages with a down payment of 20 per cent or more – will rise to either the contracted rate plus two percentage points or 5.25 per cent, whichever is higher.

As it stands, any buyer whose down payment on a home is one-fifth of the purchase price or more has to show they can afford mortgage payments if the interest rate was two percentage points higher than what the bank is offering them or the five-year benchmark rate published by the Bank of Canada, which sits at 4.79 per cent — whichever is higher.

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The Office of the Superintendent of Financial Institutions (OSFI) confirmed the changes in a release Thursday after it reviewed submissions on the plan that it first proposed in April.

“The rate in place as of June 1, 2021 will help support financial resilience should economic circumstances change, while our commitment to review the qualifying rate at least annually will contribute to continued confidence in the Canadian financial system,” Ben Gully, OSFI assistant superintendent of regulation, said in a release.

“In a complicated and sometimes volatile housing market, the need for sound mortgage underwriting cannot be underestimated.”

OSFI also said Thursday that it would review and communicate the qualifying rate at least once a year — every December — well ahead of the spring selling season.

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