On May 14th the Bank of Canada raised their benchmark qualifying rate, also known as the stress test rate. Here is some information on the Bank of Canada stress test rate change and how it affects you.
Mortgage stress test
The rate increased from 5.14% to 5.34%. The rate as been at 5.14% since approximately mid January.
There have been five increases since May of last year, where the rate was at 4.65%.
If waiting since May of last year to purchase a home in Ottawa, when looking at a $500,000 house with 5% down, you would now be able to qualify for a house price of approximately $480,000 now using the current qualifying rate.
This change was put into legislation mainly to ease affordability concerns and mitigate the payment shock that may impact lower term and variable rate customers.
April is usually the start of a spring housing market increase, but this year the new mortgage stress test and rising mortgage rates have continued to be a negative factor. Nationally, data released by the Canadian Real Estate Association showed a 2.9% decline in home sales from March to April to the lowest level in more than five years. Over half of all local housing markets reported less sales, led by the Fraser Valley, Calgary, Ottawa and Montreal.
With the recent changes in the qualifying rate, those with a pre approval in place before the change are welcome to contact me to see what amount you will now qualify for.
Contact me today to learn more about the Bank of Canada stress test rate change and how it affects you.