• Brandon Nishi

New Stress Test 2020

Will the new stress test effect homebuyers positively, negatively or is it negligible?

What's Changing?

On February 18, 2020 the Minister of Finance, Bill Morneau, announced a change in the benchmark rate for insured mortgages known as the stress test. This change will take be effective on April 6, 2020. This new benchmark could be changing weekly as the new benchmark rate will be the 5-year fixed insured mortgage rate + 2%. This does not include uninsured/insurable deals, although it's a possible change in the future.

*Insured Mortgage: Borrowers who put down anything less than 20% downpayment has to purchase mortgage insurance.

Difference in benchmark rates

- Current stress test for insured mortgages: 5.19%

- New stress test if it were effective today: 4.89%

How does this effect the average buyer?

If the new benchmark rate was effective today, it could be just enough to help new homebuyers purchase their home.

Here's a basic example between 5.19% vs 4.89%

What does this mean for the future?

- Simply put, this change in the stress test can affect new homebuyers positively and negatively, depending on the market. If rates go up higher than 3.19%, this can leave homebuyers with a rate thats harder to qualify for. If rates fall below 3.19%, this gives home buyers stronger purchasing power.

- Although this is a new change, there is a possibility that this can be changed for insurable and uninsurable mortgages as well.

Want to know how much you can qualify for? Feel free to message me anytime