Main Content

Mortgage Stress Test

The latest changes to the mortgage qualifying rules that were recently announced kick in today, Monday October 17th. Since the initial announcement a couple weeks ago, there was increased activity in almost all price ranges as buyers scurried to find the right home while they could qualify at lower interest rates if they were putting down less than 20%. Those buyers who didn’t find their new dream home in time will now face having to qualify at the Bank of Canada rate of 4.64%, or potentially double the interest rate they may have been quoted. If you are looking to buy and your down payment is 20% or more, then there is really no change for you. If you are looking to buy and you have between 5% and 20% down payment then the changes will affect you. Your effective buying power may be reduced by about 25% and now is the time to call your mortgage broker to ascertain your new pre-approval or pre-qualification target amount.

A small interest rate increase has traditionally pushed many buyers out of the market. This recent interest rate ”stress test” shift is larger than we have seen in recent years and it is expected that many more buyers will be pushed out of the market. There is a general expectation that fewer lower end buyer sales will also depress sales in all the price ranges. Properties on the lower end price points with the best features will continue to sell if priced well. A great location, upgrades or improvements will continue to sell within a reasonable sales timeline with the right marketing and strategic pricing.