In 2017, the Office of the Superintendent of Financial Institutions (OSFI) introduced the mortgage stress test.
This means when you apply for a mortgage, you are being qualified for mortgage payments based on a higher rate than what is on your mortgage contract. Currently, that rate is 4.79 per cent.
This was put in place to ensure you will be able to maintain your mortgage payment in the event the rate significantly increases.
In an attempt to get our current home prices under control, OSFI is now proposing an even more strict change to this mortgage stress test. This involves qualifying uninsured mortgages at a rate of your contract rate +2 per cent or 5.25 per cent (whichever is higher).
Refinances, mortgages with 20 per cent down and any mortgage with amortization of over 25 years will fall into this category, with talk of it being applied to all mortgages.
We anticipate this will most likely be put into place with this change coming into effect on June 1, 2021.
Having the expertise of a mortgage professional on your side matters now more than ever. They know how important homeownership is for many and their responsibility to clients starts with the right advice.
Cait Holmes is a mortgage broker in Powell River.