Canada’s Finance Minister, the Hon. Bill Morneau, announced measures related to the housing market on Monday, October 3, 2016. These measures are to address long-term housing affordability.
One of these measures being a mandatory mortgage rate stress test that will now be applied to all new mortgages that are insured whether high or low ratio, effective Monday, October 17, 2016, for High Ratio Mortgages and November 30, 2016, for insured Low Ratio Mortgages.
For example, all insured mortgages will be tested at the higher rate (latest Bank of Canada 5 year fixed rate – 4.6%), instead of the lower market rates which are generally available (2.5%).
It is important to understand this mortgage stress test as prospective buyers who may have qualified for a mortgage prior to these rules, may not be able to qualify now at that same sale price. It will reduced the amount you qualify for By approximately $50,000.
If you are currently looking for a home and have been pre qualified at the lower interest rate, it is important that you contact your realtor and mortgage specialists right away.