In a quick and unexpected twist, the Federal Government suddenly announced that the new mortgage stress test rules will now apply to all borrowers, not only those with more than 20% down payment.

Effective June 1, 2021, the new calculation of the minimum qualifying rate for uninsured mortgages will be set at either the mortgage contract rate plus 2% or 5.25% — whichever is greater.

The hard reality of this is that the majority of lenders are offering 5-year variable-rate mortgages as low as 1.5% with some are even offering rates as low as 0.99%, dependent on conditions. 

While you will not be required to pay stress test rates, you do need to prove that you can afford to pay this amount should there be a sharp increase in rates. 

These new stress test rules are expected to reduce buying power by approximately 4-5% across the country.

What does this mean for our current real estate market? The government has predicted this will help to cool down our currently red hot market, however, only time will tell.

We do know that given the extremely rapid rise in prices, these new rules will likely disqualify many home buyers, as they simply won’t be able to meet these requirements.