On Thursday, the Office of the Superintendent of Financial Institutions announced that the minimum qualifying rate, or stress test, for uninsured mortgages will remain at 5.25 per cent, or two percentage points higher than the actual mortgage rate being offered, whichever is higher.
In a stress test, buyers must prove they’re able to afford a mortgage rate two per cent higher than the qualifying mortgage rate. Uninsured mortgages are residential mortgages with a down payment of 20 per cent or more.
“In times of economic uncertainty with increasing vulnerabilities, the minimum qualifying rate continues to be a key tool supporting sound mortgage underwriting,” Tolga Yalkin, assistant superintendent, policy, innovation and stakeholder affairs at OSFI, said in a statement.
Sound mortgage underwriting ensures that mortgage payments can be made in the event interest rates go up, the release saidThe OFSI is set to review the stress test in January, and while the current rate will remain, the “economic environment could result in a more immediate change,” it added.
Mortgage rates have risen drastically, with the Bank of Canada having raised its overnight lending rate seven times this year to help cool inflation.
More to come.