Stress Test Continues; Was Almost Abolished
Yes, the Stress Test was almost done away with but it continues.
It seems to be a good thing that all the mortgages since 2018 have been “stress tested” at 5.25%. Now that we are in the middle of 3.6 million mortgages renewing over an 18 month period we find that most everyone is able to make their new mortgage payments after renewal.
Mortgage Mark Herman, MBA in Finance and 22 years experience as a mortgage broker in Western Canada
Nerd alert here!!
OSFI has also determined that loan-to-income (LTI) limits on each institution’s mortgage portfolio will remain in place, alongside the existing stress test.
LTI limits have been in place since each institution’s 2025 fiscal year start and are reported on a quarterly basis.
This is a limit on the volume of newly originated uninsured mortgage loans, at that financial institution, that exceed a 4.5x loan-to-income multiple. This is not a limit on each individual loan.
This measure was introduced in an effort to lessen the build-up of highly leveraged residential mortgage borrowers.
Background
Canada’s federal mortgage stress test began on January 1, 2018, when the Office of the Superintendent of Financial Institutions (OSFI) introduced it for uninsured mortgages.
Key Details of the Stress Test
- Introduced: January 1, 2018
- Regulator: OSFI (Office of the Superintendent of Financial Institutions)
- Applies to: Uninsured mortgages (20%+ down payment) at federally regulated lenders
- Purpose: Ensure borrowers can afford payments at a higher qualifying rate than their contract rate
Mortgage renewal: Now switch lenders without re-taking the stress test
Great news as a few leading banks, soon to be followed by the rest of the pack, have DITCHED THE STRESS TEST for RENEWALS.
This means if you have extra debts or a debt level higher than when you got your mortgage, some banks can now overlook that and still get you the best rates.
there is now an option if you were concerned about renewing due to higher debt loads or if your financial situatoin has changed since you bought your home.
Technically, this means most conventional switch (more than 20% down payment) customers no longer need to prove they can afford a payment based on the minimum qualifying rate (MQR). That rate is at least 2% higher (or 200 bps where 100 bps = 1.oo%) than actual rates.
This news is just out today for BOTH High ratio/ insured (meaning you bought with less than 20% down payment) AND Conventional (meaning 20% or more down payment)
Note, however, that property values for insurable borrowers must be under $1 million unless grandfathered.
To find out more please call (best) 403-681-4376 or email to reach out for more data.
This is a BIG DEAL. For renewals we always had to do the math to ensure you could change banks and many with higher debts than they bought with were not able to change banks. The banks knew this and offered them renewal rates that were way to high, but the home owners had no option. Now you do!
20 year mortgage expert, Mortgage Mark Herman
YES!