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The Mortgage Stress Test is Getting Even More Stressful…

May 21, 2021

Ottawa has once again stepped in to toughen up the borrowing requirements for home buyers on the same day as the Bank of Canada warned Canadians that household debt has become a risk to the economy. With the pandemic’s low interest rates pushing borrowers to increase mortgage debt, the central bank ranked household debt and run away house prices as two immediate threats to the economy.


But for years now, Canadians have been getting their mortgage approval using a benchmark rate of 4.80%, even when the market rate has been as low at 1.5%. The approval at a higher rate allows for a 3% increase in rates over time and is referred to as a “stress test” on consumers. In an effort to further throw caution on the housing market, in June borrowers will have to prove they can qualify at an interest rate of 5.25% instead of the 4.80% currently used. The rules require the lender to stress test borrowers at the greater of 5.25% or 2% above their contracted rate. This latest change would reduce the maximum mortgage an applicant could be approved for by about 4%, keeping the amortization period the same. High ratio mortgages were not include in this press release.


All of our agents have up to date information on policy changes and timelines for execution. If you need any help – just call the Monsters!

📞 416.480.0234

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