A Spring Refresher – What you need to know about the “Stress Test”

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By Fred Knowles,

Ottawa winters; in some ways it can be a full-time job to deal with. Waking up early to dig your car out, planning around cancelled school buses; the grind of the winter is really what makes an Ottawa spring so special. Spring gives you the chance to take a breath and reflect on goals you may have let slip away while dealing with those winter blues. Perhaps you’ve been thinking about taking the next step and shopping around for your first home, or maybe adding a rental property to your investment portfolio.

If you’re entering the spring market as a buyer, it’s always beneficial to make sure you go in with as much knowledge and confidence as possible. By now many of you have heard the term “stress test” being used when watching or reading the news. Since October of 2016, the federal government has been trying to catch up and control two areas they have found potentially concerning:

  • A staggering increase in housing prices
  • An increase in household debt

In a desperate effort to control these increasing risks, regulators introduced a series of new stress tests. We’ll be focusing one key rule that has proven to postpone the dream of home ownership for many responsible, qualified buyers.

October 17th, 2016 – A stress test for all insured (high ratio) mortgages

  • An “insured” mortgage is any purchase with a down payment of less than 20%
  • This insurance is paid for by the buyer and protects the bank in the case of a default
  • Because the bank is taking on an insured mortgage, they can offer lower rates

Before October 2016, the buyer would need to qualify for their mortgage using the rate they were offered (eg. 2.90%).

After October 2016, any insured mortgage must qualify using the Bank of Canada qualifying rate, which is currently sitting at 5.34%.


  • You qualified for a mortgage at 2.90%, and your monthly payments were set $1,480/month
  • Using the Bank of Canada rate at 5.34%, you now need to prove you can qualify at a payment set at $1,911/month.
  • You still get that 2.90% rate and payment; however, you now need to prove you can qualify if your payments were set at $1,911/month.

Stress Test – After two years

After two years of monitoring the effects of this new rule, there have been some staggering statistics released. We’ve seen the average age of the first-time buyer increase from 29 to as high as 36(!)  We’ve seen a slight dip in that age recently due to the increasing supply of condos. It’s also been reported that this regulation has pushed up to 20% of previously qualified buyers out of the market.

It’s our job as mortgage professionals to stay current and follow what’s happening on Parliament. There have been rumours for months that regulators were working toward helping first time buyers move back into the market. This was all leading up to the federal budget release of March 19th, 2019. After having a chance to go through any changes on the mortgage side, the results proved that the rumours were just that…but that’s another rant for another day.

For now, with all the new rules and regulations in place adding confusion to many buyers, it’s more important than ever to contact a Mortgage Agent when considering buying a home.

Fred Knowles

DLC The Mortgage Source


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