Since Jan. 1, 2018, Canadians getting, renewing or refinancing a mortgage have to prove that they would be able to cope with interest rates
substantially higher than their contract rate.
New rules by Canada’s federal financial regulator announced in October mean that even borrowers with a down payment of 20 per cent or more will now face a stress test, as has been the case since January of 2017, for applicants with smaller down payments who require mortgage insurance.
Ottawa has already moved to tighten the rules around the mortgage market six times since July 2008, with a series of regulatory tweaks aimed at limiting the amount of debt that Canadians and financial institutions take on.
Some 10 per cent of Canadians who got an uninsured mortgage between mid-2016 and mid-2017 would not have qualified under the new standards, a recent analysis by the Bank of Canada suggested.
To put a number on it, the rules will likely affect about 100,000 home buyers, who would have qualify for a mortgage for their preferred house in 2017 but will likely fail the stress test for an equally large loan starting January 1, 2018.
Lenders don’t have to apply the stress test to clients renewing an existing mortgage.
This means that if you fail the stress test, you’ll probably get stuck renewing with your current financial institution, without being able to shop around for a better rate.
In some cases, “renewing borrowers may be forced to accept noncompetitive rates from their current lenders.”
New rules by Canada’s federal financial regulator announced in October mean that even borrowers with a down payment of 20 per cent or more will now face a stress test, as has been the case since January of 2017, for applicants with smaller down payments who require mortgage insurance.
Ottawa has already moved to tighten the rules around the mortgage market six times since July 2008, with a series of regulatory tweaks aimed at limiting the amount of debt that Canadians and financial institutions take on.
Some 10 per cent of Canadians who got an uninsured mortgage between mid-2016 and mid-2017 would not have qualified under the new standards, a recent analysis by the Bank of Canada suggested.
To put a number on it, the rules will likely affect about 100,000 home buyers, who would have qualify for a mortgage for their preferred house in 2017 but will likely fail the stress test for an equally large loan starting January 1, 2018.
Lenders don’t have to apply the stress test to clients renewing an existing mortgage.
This means that if you fail the stress test, you’ll probably get stuck renewing with your current financial institution, without being able to shop around for a better rate.
In some cases, “renewing borrowers may be forced to accept noncompetitive rates from their current lenders.”
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