11 Sep Mortgage Stress Test Rate Falls Again to 4.79%
For the third time since the pandemic began, the Bank of Canada has formally lowered the average mortgage stress test rate they base their calculations on to 4.79% – making it easier for potential home buyers to purchase property.
Initially announced in 2017, the test was originally designed to cool down a hot housing market at the time and ensure that mortgage applicants would be able to pay back their loans if rates climbed.
The stress test rate was first lowered in mid-March when COVID-19 accelerated in Canada to 5.04%, then in May to 4.94%.
So what exactly does this drop mean for you as a potential home buyer? It’s not necessarily going to help you afford more property, but it will assist slightly. An industry insider recently crunched the numbers and found that an applicant earning $70,000 per year and purchasing a property with 5% down would now be able to afford roughly $4,000 more on their home’s purchase price.
Over the past few years pre-pandemic, rule changes to the stress test have made it increasingly difficult for Canadians to qualify for a mortgage. The three drops we’ve seen in the test rate since March are positive news for those looking to enter the housing market, or those who were previously unable to qualify.
While the recent lowered rate won’t necessarily help those who weren’t close to qualifying, it definitely could provide some assistance to applicants who just barely weren’t able to.
Despite the fact that we’re knee-deep in an unprecedented global pandemic, the Canadian housing market remains incredibly resilient and active. The Canadian Real Estate Association said that 62,355 sales across the country in July 2020 marked the highest monthly sales figure on record, with data going back more than 40 years. The national average price for homes sold in July 2020 hit a record $571,500, an increase of 14.3% from July 2019.
The lowering of mortgage stress test rates, along with a decrease in interest rates certainly play a central role in these figures. Are you hoping to make use of these factors and purchase a property? Give us a call at 613-228-3888 today and one of our experienced mortgage brokers will help you secure a loan that fits your needs.