Canada’s new mortgage stress test rules which are set to come into effect June 1 2021 are going to make purchasing homes a bit harder for first-time homebuyers, according to several mortgage and housing policy experts.
The new rules, coming into effect June 1 2021, ups the minimum qualifying rate, which is a gauge of whether borrowers can handle payments should interest rates increase.
According to the Office of the Superintendent of Financial Institutions, which confirmed the upcoming changes on Thursday May 20 2021, the rates would rise to either the contracted rate plus two percentage points or 5.25 per cent — whichever is higher of the two.
“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, Office of the Superintendent of Financial Institutions assistant superintendent of regulation, said in a release.
Canadians currently looking to buy a home should ensure they secure their mortgage pre-approval prior to June 1 as Office of the Superintendent of Financial Institutions will allow lenders, at their discretion, to grandfather the current stress test rate.
The same goes for anyone who has already purchased a home and anyone looking to refinance.
Office of the Superintendent of Financial Institutions 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.