Insured and Uninsured Mortgage Qualification Stress Test Changing
JUST ANNOUNCED* that the mortgage qualifying rate, more commonly known as the stress test, is confirmed to be INCREASING as of JUNE 1. The change, comes in on both conventional-uninsured mortgages (20%+ down with no mortgage default insurance) AND insured mortgages, where down payment is less than 20%. The new qualifying rate is 5.25% and could takes effect June 1, 2021. This equates to roughly a 5% decrease in purchasing power. (ex. $500k mortgage down to $475k) Our professional association (Mortgage Professionals Canada), continues to lobby the government opposing changes, putting downward pressure on Canadians ability to purchase homes.
We are being informed by most of our lenders as long as we have a firm deal and financing submitted for approval prior to June 1st your buyers get old rules..... after June 1st they need to reach out to us and get an update on affordability!!
We will be reaching out to any of our clients with active pre-approvals and amending them down accordingly.
Have questions?! Reach out – Hello@QuickfireMortgage.com or 780.238.1328
Stefan Cherwoniak, Principal Broker and the Quickfire Mortgage Solutions Team
*Formal announcement below*
Quickfire Mortgage Solutions Team received the following update
from Mortgage Professionals Canada on May 20, 2021:
Ministry of Finance follows OSFI’s uninsured mortgage announcement with heightened stress test for insured mortgages also effective June 1st.
This afternoon, at approximately 1pm, the Office of the Superintendent of Financial Institutions announced the result of its consultation regarding the uninsured mortgage stress test found in B20. As of June 1st, uninsured mortgages must qualify at the greater of a 5.25% interest rate or the contract rate plus 2%. You can read the formal announcement here.
Following closely thereafter, the Deputy Prime Minister and Minister of Finance, Chrystia Freeland, issued a statement of her own, announcing the alignment of the insured stress test with the uninsured stress test, also effective June 1st. You can read that statement here.
While not surprised by the announcement, Mortgage Professionals Canada is disappointed the Minister decided to move so quickly. Given the traditional audience for insured mortgages, namely young aspiring middle-class families, single individuals, and the recently separated, all owner occupiers of the properties they purchase, MPC would have preferred the insured qualification rate had not been increased in the interest of this community; those without access to family assistance or a bank of mom and dad to help with a down payment. Given the rapid rise in prices, making qualification more stringent now will disqualify many of the Canadians the government has promised to support. Since the First Time Home Buyers Incentive program also requires an insured mortgage qualification for borrowers to be eligible, the existence of this program, even with the increased limits, will do nothing to help these newly disqualified buyers.
You can read the position and arguments to OSFI and Finance in Mortgage Professionals Canada consultation submission here.
MPC will continue its dialogue with the Ministry of Finance and related agencies and keep you informed of any further developments.