Mortgage Stress Test Rules Get More Lenient


Mortgage stress test rules get more lenient



For the first time since the government implemented new stress test rules on Canadian home loans, the bar has been lowered — meaning a would-be homebuyer could be approved for a bigger mortgage today than they would have yesterday.

The stress-test level is set at either two percentage points above the actual mortgage rate or whatever the average five-year posted rate is at Canada’s big banks, as calculated by the Bank of Canada — whichever is higher.

That bank rate hasn’t changed since May 2018, when it rose to 5.34 per cent. But this week, it inched down to 5.19 per cent, the first time it has decreased in almost three years.

Rate comparison website calculates the typical borrower can now afford about 1.4 per cent more home than they could previously. Assuming a borrower had a down payment of at least 20 per cent, no other debts to speak of, and earned $100,000 a year, under the previous test level, they would have qualified for a home valued at $589,000. Today that same family can buy a house worth $597,000. (CBC News, July 19, 2019).

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