Some changes may be coming to Canada’s mortgage stress test.
In other parts of this blog page we provided some information on the mortgage stress test. Now we would like to advise you of some potential changes to this program that might be coming in 2024.
In January 2023 the Office of the Superintendent of Financial Institutions (OSFI) asked for feedback from the financial industry on Guideline B-20, the rules that regulate mortgage underwriting practices in Canada. This request was in response to increasing interest rates and an overall riskier borrowing environment. On October 16, 2023 the OSFI released its response to the feedback it received. Some of those responses were very interesting and in some cases caught the industry a little off guard.
Most borrowers will be stress tested when switching at mortgage renewal time.
Currently, the stress test requires borrowers to prove they can carry their mortgage at a rate of 5.25% (known as the Mortgage Qualifying Rate or MQR) or their contract rate plus 2% – whichever is higher. OSFI has confirmed this threshold will remain in place for 2024.
As of now high ratio borrowers will be exempt from the application of the MQR when switching lenders at renewal.
OSFI will not toughen the Total Debt Service and Gross Debt Service ratios at this time.
New loan-to-income measures may be introduced.
Any and all changes to the mortgage stress should be released in January 2024.
What are your thoughts on this or any other real estate topics? Share them or get in touch to find out more about the market. I’d love to hear from you…