We are all talking about the stress test to get a mortgage as if it were a new thing.
It has been around for 19 months and seems to have become the new normal. Well, the new normal has just changed and it has changed to the benefit of the homebuyer!
Let’s take a step back and try to understand why the rules were first put in place. Essentially the stress test was put in place to save us from ourselves. Many homebuyers were buying at the top end of what they could afford and something as simple as a 1% jump in their mortgage interest rate could put them in a position of having to choose between buying groceries or paying their mortgage. The stress test allowed the banks and the borrower the comfort of knowing that even with a rise in interest rates people would still be able to manage the debt they were accepting when getting a mortgage.
The stress test rules as implemented in January of 2018 meant that you would have to qualify at either your approved mortgage rate plus 2% or the average 5 year posted rate at Canada’s big banks, as calculated by the Bank of Canada which was 5.34%. The good news is that for the first time in almost 3 years the posted rate has dropped to 5.19%.
The impact of the lowered rate will be that if you are in the market for a mortgage you will qualify for slightly more this week than you would have last week. Using the old bank rate if you qualified at $350,000 last week this week you may qualify at $355,000. This allows you more room in your negotiation with the seller or maybe the ability to add some of those upgrades you were hoping for.
This change is not a monumental. It will not allow you to pay your mortgage any quicker, it won’t allow you to trade your duplex for a mansion. What it does is inject a little more confidence back in the market and is reflective of the fact that actual mortgage rates are dropping. Couple the lower mortgage rates with home prices that are reflective of the inventory in the market and it becomes the perfect time to buy a new home.
If you are considering home ownership now is the time to make the leap. Nothing bad can happen from going and talking to your bank or a mortgage broker and I promise you it isn’t as scary as we make out to be in our heads. In the meantime, if you’re in the market for a Rohit home, check out our quick possession listings available in Edmonton, Calgary and Regina. For more info, CBC shared the following article Mortgage stress test rules get more lenient for first time.