25 March 2019

“We’ve always supported the test, but we’ve been calling for its reduction”, – he says. In Taylor’s opinion, the test should be cut to a contract rate plus 0.75%. As the most popular mortgage is a five-year fixed-rate, borrowers have time to raise their equity before the renewal under a new rate. In addition to it, household incomes also tend to grow in time. As a result, homeowners have certain flexibility in case of potentially higher rates.

If your renewal time has come, and you want to change your lender and get a better interest rate, you’ll need to undergo a test once again. “Borrowers are hostages with their first bank,” – noted Phil Moore, president of the Real Estate Board of Greater Vancouver. “It’s not fair,” – he said. Moore suggests changing it in order to help the Canadians, as banks are benefitting from them with such renewals.

The stress test has a broad influence. It doesn’t matter where you live in Canada, in case you need to switch from a federally regulated financial institution with your mortgage, you’ll have to be tested. Moreover, it’s a rule for everyone, regardless of your down payment size. Moore believes it should be also changed.

He supports the idea of a scaled test, meaning that borrowers with larger downpayments face a lower test rate. “It could be, for instance, a contract rate plus 1.75% in case of a 30% down payment”.