The Government of Canada has announced that the Stress Test is being revised to make qualifying for a mortgage a reality for more Canadians. Today we have to qualify clients at the benchmark rate of 5.19%, regardless of the client’s contract rate.

The changes will mean that instead of using 5.19% to qualify clients, I will be able to use a weekly median rate plus 2.00%. So let’s say the weekly median rate was set at 2.85% today, we would use 4.85% as the qualifying rate which is 34 basis points less than the old qualifying rate (5.19%). 34 basis points is a massive difference that will make the debt servicing ratios much more reasonable. Every other week I see situations where clients can debt service the real contract rate on a mortgage amount, but don’t pass the stress test at that same mortgage amount. In these scenarios we reduce the purchase price they would be approved for.

I will fill you in as more details come out. In the meantime, don’t hesitate to reach...

Read full post