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Home Ownership, Mortgage News

Changes to the Stress Test – What it means for buyers

The government has come out with another mortgage rule change. This time the rule change may actually increase affordability for people looking to purchase a property with less than 20% down. Now before you start jumping for joy let’s take a look at the numbers and how they will work out for increasing your affordability.

Currently, and until April 6th, the rule as it stands right now would require any buyer, whether insured or conventional, to use the bench mark qualifying rate of 5.19% or their actual rate plus 2%, whichever is higher.


The new rule, as of April 6th 2020, will allow “insured” buyers to use their 5yr fixed rate plus 2% and that number can be lower than the bench mark rate.


Using RBC as our industry benchmark, who’s current rate is 3.09%, if an insured buyer were to purchase something, they would qualify at 5.09% (3.09 plus 2%), instead of the current benchmark rate of 5.19%.

As you can see this difference here is 0.10% and will have a little impact on affordability.

Here is a real life example:

Jane Doe makes 100k/yr and wants to buy a condo in Toronto that has monthly condo fees of $400/month and property taxes of $200/month.

If Jane Doe puts 10% down, here is how the old versus new rules would look for her

(For our example, assume Jane has great credit and Zero Liabilities)

Old/Current rule = qualifying at 5.19%.

-Maximum purchase purchase Price = 500k

New rule = qualifying at 5.09%
– Maximum purchase price = $510k

So while it may not be a huge increase, it is still a net positive, especially for first time homebuyers. Want to find out exactly how much you can afford?

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