Bank regulator – OSFI is proposing higher mortgage stress test (5.25 from 4.79) to make it harder for Canadians to qualify for the mortgage to come in effect on June 1. This means borrowers will need to prove that their finances can pay for the loan at the higher rate of 5.25% regardless of what a lender is willing to lend them. This would make it harder to qualify for a home loan, shrinking the pool of qualified borrowers and ultimately bringing down some of the upward pressure on house prices in the country.
A 25-year mortgage of $300,000 at a mortgage rate of 2% would cost $1,270 a month and with being stress tested at current rate of 4.79% the monthly payment goes up by almost $500 a month, to $1,709. That’s an increase of almost 35% to a home borrowe’s monthly budget. With the introduction of new stress test at 5.25% the monthly payment would jump to $1,788 which is an increase of almost 41%.
