BREAKING: Qualification rate for mortgage stress test will go up on June 1 – FOR INSURED MORTGAGES AS WELL!

The Office of the Superintendent of Financial Institutions (OSFI) has confirmed that stricter rules to the mortgage stress test will take force on June 1.

According to OSFI, the new qualifying rate for an uninsured mortgage (the one with a down payment of at least 20%) will go up to either the contract rate plus 2% or 5.25% (the higher option is used).

The changes confirmation follows OSFI’s review of submissions on the plan to increase the rate, which was first suggested in April.

Today, the stress test uses the mortgage rate plus 2% or the central bank’s five-year rate, which is 4.79% now (the higher one is chosen).

OSFI Assistant Superintendent of Regulation Ben Gully says the change will help restrain any financial risk coming from the real estate sector.

“In a complicated and even volatile real estate market, the need for stable mortgage underwriting cannot be underestimated,” – he added.

“The new rate will help support financial resilience in case the current economic conditions change, while our promise to review the qualifying rate at least once a year will strengthen confidence in the Canadian financial system.”

OSFI announced it will review the qualifying rate at least once a year – in December. In OSFI’s opinion, such timing will allow it to adjust the rules ahead of the active spring selling season.

The first version of the stress test was released in 2016 as regulators tried to protect the financial stability from possible risks caused by the housing sector. Later, OSFI announced plans to review the test conditions in January 2020 before postponing the consultations in March 2020 because of all the uncertainties coming from potential pandemic influence on the national real estate market.

Following closely after, Minister of Finance, Chrystia Freeland, issued a statement, announcing the alignment of the insured stress test with the uninsured stress test, also effective June 1st.