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Why I'm stressed about the new stress test

The Office of the Superintendent of Financial Institutions (OSFI) recently announced it’s revisiting the stress test on conventional mortgage loans (i.e. at least a 20% down payment on a purchase or refinances), slated for June 1 implementation. Currently, borrowers are stress tested against the current mortgage qualifying rate of 4.79%, or the contract rate plus 200 basis points (2%)—whichever is greater. Most Canadians fall into the former camp of having to qualify at 4.79%. But, if the bank regulator has its way, this rate will increase to 5.25%, which will, on average, reduce the maximum qualifying amount for a mortgage by approximately 5%. The problem here is that this policy change is meant to try and cool a red-hot market, but it’s focusing on the wrong variable. There are many mechanisms that have various effects on our housing market, but reducing the affordability of Canadians who are, by all accounts, in the lowest risk category for defaulting is just plain silly. These borr

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