It’s two months and counting to January 1, 2018 when the new “stress-test” for all mortgages kicks in.

Don’t be stressed about the “stress-test”?
We got you!

The Office of the Superintendent of Financial Institutions (OSFI), an independent Federal government agency tasked with regulating financial institutions in Canada, recently announced a new mortgage rule that would come into effect on January 1, 2018 that would require lenders to “stress test” all mortgages to ensure consumers can afford their mortgage payments if interest rates were to rise.

As a consumer, this means, that after January 1, 2018, it’s going to be harder to get a mortgage.

What is the stress test?

Under the new rule, a consumer would need to prove they can afford payments based on either the Bank of Canada’s five-year benchmark rate which is currently 4.89% or for existing homeowners, their existing mortgage rate plus two percentage points, whichever is higher, if they refinance with a different lender.

As an example, if you have an existing mortgage rate of 2.98%, as of January 1, 2018, you would then need to “stress test” your ability to pay your mortgage at a rate of 4.98%, not your current rate.

Why is this happening?

In the Fall of 2016, OSFI created a similar “stress-test” for all mortgages where a consumer had a down-payment of less than 20% and required insurance to secure their mortgage undergo a “stress test” to ensure they were able to afford their mortgage payments.

This rule will now be extended to all mortgages even when a consumer has a 20% or more down-payment and does not need mortgage insurance starting in the new year.

The rationale behind this change from OSFI is to ensure consumers don’t take on too much debt while bolstering the financial stability of the housing market and staving off a housing meltdown similar to what happened in the United States due to consumer insolvency with increased interest rates.

What does this mean for you?

Starting on January 1, 2018:

• Depending on your income and debt level, your buying power, i.e. the amount of housing you can afford to purchase will be decreased;
• For a first-time homebuyer, it could make it much more difficult for you to enter the housing market;
• You may only qualify for funding for a high-cost alternative mortgage;
• Lenders may charge higher interest rates for longer amortization period;
• For existing homeowners, you would likely need to remain with your current lender thus missing out on a better type of mortgage or mortgage rate from a competing lender;
• If you have high-debt-to-loan ratios, you will have more difficulty consolidating your debt into your existing mortgage even with your current lender;
• If you are thinking about refinancing your mortgage for renovations or need to break your current mortgage for any reason, you will have to qualify again at the higher rate;
• If you are looking to qualify for a home equity line of credit (HELOC) you will now need to qualify at a rate of 5.70% instead of the typical of 4.89%

Do NOT stress!

We understand that OSFI is implementing these new rules as a way to protect the economy, but we think it will hurt a lot of people trying to get into the housing market and make the process much more difficult.

Though this new rule will make the mortgage process harder, we are experts at mortgage financing — that’s our whole business — and we will work through this with you. Unlike a single lender, we have access to many different lenders and mortgage products. We will tailor your mortgage to suit your financial situation by providing you with many different options.

Do NOT delay…. We know this is a very busy and financially challenging time of year, but we strongly recommend you ACT NOW ahead of the January 1, 2018 deadline!

Do NOT stress… We are on the final countdown to 2018! Give us a call NOW at 1.800.288.2764 to speak with one our Mortgage pros who will guide you on your mortgage financing journey.

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