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New Canadian mortgage 'stress test' rules take effect June 1

Author: Pat Foran

Consumer Alert Videojournalist, CTV News Toronto





TORONTO -- The Canadian real estate market has seen soaring prices, bidding wars and a lack of supply throughout the pandemic.


There is a concern some home buyers may be stretching their mortgage budgets to the max, which is why a new mortgage stress test will be coming into effect on June 1.

The new rules will reduce the buying power for some home buyers, protect people in the event that interest rates go up and potentially cool the Canadian housing market, which has seen record prices this year.


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“Tomorrow, it gets harder to qualify for a mortgage for most people" according to Rob McLister, mortgage editor for RATESDOTCA .


For some Canadians looking to buy a home, they'll have less buying power when the new stress test rules take effect.


If you qualified for $500,000 under the current minimum qualifying rate of 4.79 per cent, that amount is reduced to $479,000 under the new qualifying rate of 5.25 per cent.

“So that increase in the minimum qualifying rate of 4.79 per cent is going to make it harder for people to get a mortgage who have a higher debt to income ratio" McLister said.

Leah Zlatkin, principal broker with Brite Mortgage, said the new rules could help some home buyers from taking on too much mortgage debt.


“The purpose of the stress test is to make sure people can afford things if interest rates go up," Zlatkin said.


Zlatkin said some of her clients were scrambling to find a home over the weekend before the new rules kicked in.


“I also did see a lot of clients reach out to get pre-approved before the new rules come into effect on June 1st" she said.


The change to mortgage rules may have the biggest impact on first-time homebuyers who have had to take part in bidding wars to get their dream home.


“I do think there are a number of Canadians who are saying, you know what, let’s just pause and let’s see if the stress test slows things down and maybe some of the prices will come down with it," Pattie Lovett-Reid, CTV’s Chief Financial Commentator, said.

Even with the new rules, there have been some signs the housing market is starting to slow down. The Canadian Real Estate Association reported the number of homes changing hands fell 12 per cent from March to April.


Even if the real estate market does slow down, no one is expecting huge price drops, but it could provide a more balanced market.


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