The Bank of Canada lowered the stress test rate for the first time in 3 years. The stress test rate will drop to 5.19% from 5.34%. The Mortgage stress test is a financial bar that a borrower must meet in order to be approved for a mortgage loan. The stress test was hiked in early 2018 to cool the red hot housing market and ensure that borrowers were less vulnerable to an economic shock.
The Globe and Mail crunched the numbers and determined that someone earning a $50,000/year income with a 30-year amortization and 20% down will be able to spend $4,000 more for a house. Someone earning $100,000/year income will be able to do $8,300 more for a home.
There has been mixed feedback in response to the rate adjustment. Some feel this will have a positive physiological impact on buyers who are in a wait and see a pattern, bringing them off the fence. Others feel the lower rate will have a minimal impact on the market, as the purchasing power borrowers stand to gain is not enough to resolve the affordability issue.
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