Under the new mortgage stress test, the qualifying rate for uninsured mortgages is set at either 2% above the contract rate or at 5.25% – whichever is greater. However, record low interest rates don’t give borrowers much of a choice, setting the stress test rate at 5.25% for both variable and fixed-rate mortgages.
Ratehub.ca said it is also likely that fixed-rate borrowers would face a stress test rate of 7.21% given that the rate has increased by two-thirds in the last four months, which is why the most stretched borrowers are opting for variable rates.
Read more: No cause for panic on variable rates, says industry expert
For Dave Larock, president of Integrated Mortgage Planner Inc., the Office of the Superintendent of Financial Institutions (OSFI) made a “glaring mistake” in raising the stress test rate. Instead, he urged OSFI to set a…