Fort McMurray Mortgage Stress Test
A new stress test is being rolled out in April. This new stress test affects every insured mortgage. The new stress test will use the weekly, median 5-year fixed insured mortgage rate plus 2 percent. The current mortgage rate as we write this is 2.34%. In this case, the stress test will use an interest rate of 4.34%. That is .85 basis points below the current benchmark qualifying rate of 5.19 percent. Furthermore, any slight change in the interest rate has a dramatic impact on how much qualify for a mortgage on a house in Fort McMurray. The new stress test rate goes into effect April 6. Right now this is great news from homebuyers, you can spend more qualifying at a rate that is much more reasonable and directly corresponding with the economy.
Previously the big 5 Banks determined the rate of qualifying by the average of the five year fixed, they all have posted rates far higher than the rate you will receive for a mortgage. This is why the bench mark rate currently 5.19% used in qualifying for new mortgages. Starting April the bench mark rate will be the average the mortgage default insurers see each week from all lenders including non-bank lenders such as First National, Mcap and RMG to name a few, who do not have posted rates so the rate will be lower for the average used to determine the bench mark or qualifying rate. This is going to make qualifying for a mortgage far more reasonable and indicative of our current economy.
The mortgage stress test has been criticized for a number of reasons. One concern is that big banks probably have been keeping their 5 year, fixed posted rates artificially high, in turn inflating the interest rate used in the stress test.
The Minister of Finance, Bill Morneau, says that the government is reviewing the stress test to ensure that it is responsive to current market conditions. That announcement came after Justin Trudeau asked federal institutions to make the stress test more dynamic. The result was a decision to make the stress test more representative of the mortgage rates actually offered by lenders. The OSFI is also considering using this new benchmark interest rate to determine the minimum qualifying rate for uninsured mortgages.
How These Stress Test Changes Affect Fort McMurray Home Buyers in 2020
Before this change, the “Big Six” banks determined the benchmark interest rate. That benchmark rate was used by the Bank of Canada and in the stress test itself. By being kept high, this prevented many people from qualifying for mortgages, while others weren’t able to qualify for the best possible rate. The change means many more people can qualify for a mortgage. Furthermore, the interest rate in the test is more flexible, so if you don’t qualify for a new Fort McMurray home today, you might in the future whether or not you’ve saved up a large down payment or want to take advantage of a borrowed down payment to help get you into your new home in Fort McMurray, the lenders have programs to assist with this.
Call Your Fort McMurray Trusted Mortgage Brokers at Whalen Mortgages to see your options towards buying a new home. We can have your mortgage application pre-approved in as little as 20 minutes and out house shopping. 780-715-7533