The new mortgage regulations which come into effect June 1st, 2021

Friday May 28th, 2021


As you may have heard, there are some changes coming to the Qualifying Rate starting on June 1st. The Qualifying Rate is the rate we use in the “stress test” to determine your maximum mortgage amount. Currently it is 4.79%. On June 1st it will increase to 5.25%. This will likely impact the maximum mortgage that your clients will qualify for.

Initially, this change was only supposed to effect uninsurable mortgages. An uninsurable mortgage falls into one or more of these categories:
  • Purchases of $1 million or more
  • Rental properties
  • Refinances
  • Amortizations of longer than 25 years

The Minister of Finance announced that the rate change will now be applied to ALL mortgages and is expected to reduce buying power by between 4% and 5%. It is estimated that 1 in 5 homebuyers could be affected by this new qualification requirement.

The government felt that the increase in the stress test rate was necessary to ensure Canadians can afford their mortgage payments in the event interest rates were to rise and as an attempt to moderate the heated housing market. The Office of the Superintendent of Financial Institutions (OSFI) also committed to reviewing the qualifying rate at least annually to ensure continued confidence in the Canadian financial system.

 Since we have done a pre-approval, you may want to consider making a purchase before June 1st, especially if you’re purchasing close to the upper limit of the pre-approval. I realize that that might be a tall order in the current market conditions.

Existing approvals (not pre-approvals) will be grandfathered.

Post a comment