What is the stress test?
During the qualification process, lenders use the qualifying rate to measure the borrower’s ability to repay the mortgage over the lifetime of the loan. It is intended to protect Canadians who may be subject to higher interest rates in the future. All mortgages will be required to qualify at the greater of the posted benchmark rate (currently 4.99%) or 200 basis points above the mortgagor’s contractual rate.
Many are unaware that the stress test has already been practiced on insured mortgages for over a year now, which has already impacted a large market share of people. Now in 2018, uninsured buyers, refinancers, and switch/renewals will seriously have to reconsider their budgets just like their insured counterparts.
Why are they expanding the rule to uninsured mortgages?
Banks and other creditors have made it clear that around 46% of Canadian mortgages are uninsured. To protect the risk of defaulting mortgages in the event that rates rise rapidly, the OSFI believes that testing people’s ability to debt service worst-case scenarios will help.
My advice, go see your mortgage broker if you think it’ll impact you in the future.