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There's always lots to consider, particularly if you're a first-time home buyer. In addition to helping you find your dream home, your REALTOR® can also help you navigate the new stress test rules and requirements. 


Start by downloading a copy of the Homebuyers' Road Map—a guide covering virtually every aspect related to buying a home. Then, to get an idea of what you might be able to afford, our mortgage calculators includes interest rate risk in its parameters, assuring your estimates will pass the mortgage stress test.


Armed with a little know-how and backed by the support and expertise of your REALTOR®, you'll be on your way to holding the keys to your new home in no time!  

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Sure, you can afford your home now, but what if mortgage rates go up?


Low interest rates and mortgages have been a fact of life in Canada for some time now. At the time of publication, the 5-year average mortgage rate has hovered around 5% for nearly a decade. This is a far cry from late 1981 when mortgage rates were as much as 21%.

New mortgage rules

In 2017, the Office of the Superintendent of Financial Institutions (OSFI) took steps to help protect lenders and home buyers alike against future interest rate increases. Since January 1, 2018, new mortgages are subject to comparison with higher interest rates than the one issued at the time of the mortgage. Homeowners must be able to afford a mortgage at the Bank of Canada's current five-year average posted rate or at an interest rate that's 2% above what they're currently applying for, whichever rate is highest.

Why OFSI made the move

Perhaps motivated by the foreclosure crisis in the United States, the OSFI felt Canadian consumers needed protection from forces deemed outside of homeowners' control.

The effect of the stress test means you may not qualify for the home you desire. If you're targeting a home with a $700,000 mortgage, for example, you may only qualify for about $550,000 under the new stress test rules. This could make a big difference in your choice of neighbourhoods in certain markets. 


Working the stress test process

The new mortgage rules don't have to be a barrier, however. First, there are ways around the stress test standard, which only applies to federally–regulated lenders. Credit unions, which are regulated at the provincial level, are exempt from stress test provisions. The same is true for private lenders. Alternatively, adding a co-signer to your mortgage can increase your mortgage target, even with the stress test rule in place.

How REALTORS® help

There's always lots to consider, particularly if you're a first-time home buyer. In addition to helping you find your dream home, your REALTOR® can also help you navigate the new stress test rules and requirements.

Start by downloading a copy of the Homebuyers' Road Map—a guide covering virtually every aspect related to buying a home. Then, to get an idea of what you might be able to afford, our mortgage calculators includes interest rate risk in its parameters, assuring your estimates will pass the mortgage stress test.

Armed with a little know-how and backed by the support and expertise of your REALTOR®, you'll be on your way to holding the keys to your new home in no time!  


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The International Monetary Fund (IMF) has weighed in on Canada’s housing market, saying it would be “ill-advised” to stimulate housing activity by easing the mortgage stress test.

In a report released by IMF staff this week following an official visit to Canada, the IMF noted the government has been under pressure to “ease macroprudential policy or introduce new initiatives” that would support increased housing activity.

“This would be ill-advised, as household debt remains high and a gradual slowdown in the housing market is desirable to reduce vulnerabilities,” the report reads.

Last week, Conservative Party leader Andrew Scheer said he would eliminate the stress test on mortgage switches at renewal, and consider re-introducing 30-year amortizations for insured mortgages if his party is elected in October.

Research released last month by TD Economics estimated that the B-20 regulations (stress test) resulted in 40,000 fewer home sales in 2018. Similar research from Benjamin Tal, CIBC’s Deputy Chief Economist,  estimated the stress test is responsible for an 8% decline in new mortgages started in 2018, translating into a $15 billion drop in lending activity.

Meanwhile on Thursday, CMHC CEO Evan Siddall said the stress test is “doing what it is supposed to do,” he wrote in a letter dated to the Standing Committee on Finance.

“The mortgage stress test is exactly the kind of policy we need to protect our economy,” Siddall wrote, saying calls from industry groups such as Mortgage Professionals Canada, the Canadian Home Builders Association and the Ontario Real Estate Association to ease the stress test would add to housing demand and price inflation of 1-2% in the larger cities.

“My job is to advise you against this reckless myopia and protect our economy from potentially tragic consequences,” he said.

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Earlier this month, Bank of Canada Governor Stephen Poloz called on banks and other lenders to start pushing longer-term mortgages. Last week, HSBC responded by offering a record-low 10-year fixed rate of 2.99%.


That means the peace of mind of knowing mortgage payments won’t change for 10 years can be had for just a quarter-point premium above HSBC’s own 5-year fixed rate special.


In a recent post, RateSpy.com’s Rob McLister called HSBC’s 2.99% 10-year fixed rate offer “simply remarkable.”

But despite the competitive pricing for long-term rate stability, he cautioned that decade-long mortgages still aren’t for everyone, especially if 5-year fixed rates continue to fall.


While someone with a 10-year fixed rate could switch into a lower 5-year rate should rates drop, that would entail penalties—three months’ interest if the switch is made after the first five years of the 10-year mortgage, or a more onerous interest rate differential (IRD) penalty if the mortgage is broken in the first five years.


“That risk, and the small market-implied odds of meaningfully higher rates in five years, are largely why 5-year mortgages still have the edge over 10-year terms, for most people,” McLister wrote.


In a previous interview, Ratehub co-founder James Laird told Canadian Mortgage Trends that 10-year rates are most suited for those who are most risk-averse, as it allows them to set their budget over a longer horizon and reduces the risk of renewing into higher rates, given that renewals are more frequent with shorter mortgage terms.


“The 10-year fixed rate is an insurance policy, so if you’re really, really concerned about rates rising, and really want to take the risk out of your borrowing, it’s that type of consumer,” he said. But he noted that BoC Governor Poloz himself indicated that rates weren’t likely to make any major moves for an extended period of time. “That is not a good reason to go with a longer term. That’s justification for taking a variable rate or a short term.”

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Last week’s market reports from real estate boards including those in Vancouver and Toronto show that there is recovery underway with even the tough market conditions in Vancouver suggesting a bottoming-out.

This is unlikely to end calls for the mortgage stress tests to be altered or scrapped, says RBC Economics’ senior economist Robert Hogue, but it should “quiet down critics fearing a market collapse.”

In his latest assessment of the Canadian housing market, Hogue says the rebound for Toronto sales in May (resales up 19% year-over-year) says more about weakness a year ago than market momentum, with seasonally adjusted figures pointing to stabilization rather than a surge.

And ‘back-of-the-envelope’ calculations on the slowing of declining resales in Vancouver (-6.9% year-over-year in May compared to -30% in April) show that resales increased by more than 25% month-to-month in May on a seasonally-adjusted basis.

“This is the strongest sign yet that the market isn’t spiraling out of control. In fact, we believe it indicates that a bottom has been reached,” writes Hogue.

The report also notes several other Canadian housing markets as showing encouraging signs.

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The data relating to real estate on this website comes in part from the MLS® Reciprocity program of either the Real Estate Board of Greater Vancouver (REBGV), the Fraser Valley Real Estate Board (FVREB) or the Chilliwack and District Real Estate Board (CADREB). Real estate listings held by participating real estate firms are marked with the MLS® logo and detailed information about the listing includes the name of the listing agent. This representation is based in whole or part on data generated by either the REBGV, the FVREB or the CADREB which assumes no responsibility for its accuracy. The materials contained on this page may not be reproduced without the express written consent of either the REBGV, the FVREB or the CADREB.