Changes to the stress test

Today, Minister of Finance, Bill Morneau, announced changes to the benchmark rate used to determine the minimum qualifying rate for insured mortgages, also known as the “stress test.” These changes will come into effect on April 6, 2020. The new benchmark rate will be the weekly median 5-year fixed insured mortgage rate from mortgage insurance applications, plus a two percent (2%) buffer.

Additionally today, the Office of the Superintendent of Financial Institutions (OSFI) announced that it is considering implementing the same benchmark rate of the weekly median five-year fixed insured mortgage rate from mortgage insurance applications, plus a two percent (2%) buffer for uninsured mortgages, which will align minimum qualification limits for the insured and uninsured mortgage market.

MPC has been recommending uncoupling the stress test rates from the Bank of Canada posted 5 year fixed rate since its introduction to the insured 5 year terms in 2016. Setting the floating rate on the insured contract rate will make the test more dynamic and responsive to market and bond rates. We thank the government for acknowledging this issue and making these changes. We do, however, still consider a two percent (2%) buffer to be an onerous test level given the economic realities globally.

MPC’s 5th Parliament Hill day takes place tomorrow in Ottawa, with over 50 meetings scheduled with MPs, Senators, and senior policy officials. Our member volunteers will thank the government for making this first, much-needed adjustment to mortgage qualification in Canada, and continue to ask for additional support measures for those most impacted by the introduction of these tests; aspiring middle-class Canadians and would-be first-time buyers. Included in our asks will be the reintroduction of an insurable 30-year amortization for first-time buyers, and increases in the income maximum multipliers under the newly introduced First Time Home Buyers Incentive Plan.

We will continue to keep you informed of any new developments.