New Canadian mortgage 'stress test' rules take effect June 1
The Canadian real estate market has seen soaring prices, bidding wars and a lack of supply throughout the pandemic.
There is a concern some home buyers may be stretching their mortgage budgets to the max, which is why a new mortgage stress test will be coming into effect on June 1.
The new rules will reduce the buying power for some home buyers, protect people in the event that interest rates go up and potentially cool the Canadian housing market, which has seen record prices this year.
“Tomorrow, it gets harder to qualify for a mortgage for most people" according to Rob McLister, mortgage editor for RATESDOTCA .
For some Canadians looking to buy a home, they'll have less buying power when the new stress test rules take effect.
If you qualified for $500,000 under the current minimum qualifying rate of 4.79 per cent, that amount is reduced to $479,000 under the new qualifying rate of 5.25 per cent.
“So that increase in the minimum qualifying rate of 4.79 per cent is going to make it harder for people to get a mortgage who have a higher debt to income ratio" McLister said.
Leah Zlatkin, principal broker with Brite Mortgage, said the new rules could help some home buyers from taking on too much mortgage debt.
“The purpose of the stress test is to make sure people can afford things if interest rates go up," Zlatkin said.
Zlatkin said some of her clients were scrambling to find a home over the weekend before the new rules kicked in.
“I also did see a lot of clients reach out to get pre-approved before the new rules come into effect on June 1st" she said.
The change to mortgage rules may have the biggest impact on first-time homebuyers who have had to take part in bidding wars to get their dream home.
“I do think there are a number of Canadians who are saying, you know what, let’s just pause and let’s see if the stress test slows things down and maybe some of the prices will come down with it," Pattie Lovett-Reid, CTV’s Chief Financial Commentator, said.
Even with the new rules, there have been some signs the housing market is starting to slow down. The Canadian Real Estate Association reported the number of homes changing hands fell 12 per cent from March to April.
Even if the real estate market does slow down, no one is expecting huge price drops, but it could provide a more balanced market.
CTVNews.ca Top Stories
BREAKING Police investigating shooting outside of Drake's Bridle Path mansion: source
Toronto police are investigating a shooting that took place outside of Drake’s Bridle Path mansion early Tuesday morning, a source tells CP24.
There's actually no such thing as vegetables. Here's why you should eat them anyway
The rumours are true: Vegetables aren't real — that is, in botany, anyway. While the term fruit is recognized botanically as anything that contains a seed or seeds, vegetable is actually a broad umbrella term.
'It looked so legit': Ontario man pays $7,700 for luxury villa found on Booking.com, but the listing was fake
An Ontario man says he paid more than $7,700 for a luxury villa he found on a popular travel website -- but the listing was fake.
The Met Gala was in full bloom with Zendaya, Jennifer Lopez, Mindy Kaling among the standout stars
The Met Gala and its fashionista A-listers on Monday included Jennifer Lopez, Zendaya and a parade of others in a swirl of flora and fauna looks on a green-tinged carpet lined by live foliage.
3 Indian nationals accused of murdering Hardeep Singh Nijjar facing court in B.C.
Three Indian nationals accused of murdering Sikh activist Hardeep Singh Nijjar are due to face court Tuesday over the killing that triggered a major diplomatic rift with India.
Israeli forces seize Rafah border crossing in Gaza, putting ceasefire talks on knife's edge
Israeli tanks seized control of Gaza's vital Rafah border crossing on Tuesday as Israel brushed off urgent warnings from close allies and moved into the southern city even as cease-fire negotiations with Hamas remained on a knife's edge.
Canadian cadets rock mullets and place second at U.S. military competition
Sporting mullets, Canadian Armed Forces officer cadets placed second in an annual military skills competition in the U.S.
Highlights from the 2024 Met Gala exhibit: Sleeping Beauty would wake up for these gowns
Sure, she was a royal princess and all. But there’s no way Sleeping Beauty — either before or after her nap — ever had quite the fabulous wardrobe that’s been assembled at the Metropolitan Museum of Art.
Noelia Voigt resigns as Miss USA, citing her mental health
Noelia Voigt, who was crowned Miss USA in November 2023, has announced she is resigning from her role, saying the decision is in the best interest of her mental health.