Home buyers will need to prove they can pay off loans with an 8% rate or more
The Office of the Superintendent of Financial Institutions (OSFI) has decided to maintain the qualifying test imposed on mortgage borrowers, as reported in an article by Bloomberg.
The OSFI said that the minimum qualifying rate (MQR), the stress test that determines if borrowers applying for uninsured mortgages will be able to handle possible rate increases in the future, will continue to be the greater of 5.25%, or the bank’s contract rate plus two percentage points.
“The minimum qualifying rate for uninsured mortgages has produced a more resilient residential mortgage financing system characterized by low default and delinquency rates,” said Peter Routledge, the financial superintendent.
“This discipline contributes to the resilience of Canada’s financial system,” he added.
Chrystia Freeland, the finance minister, stated that the MQR provides a buffer for home buyers. It also protects Canadians from changes in the economy, such as increased interest rates and unforeseen personal circumstances.
The typical mortgage rates at major banks now sit between 6% and 7% which means that home buyers will need to prove that they are able to make payments on loans that have an 8% rate or more.
The real estate industry has been calling for either the end or the loosening of the stress test in order to alleviate the housing affordability crisis as rates are much higher than they were two years ago.
