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Why the Mortgage Stress Test Could Still Affect you in 2022

The Office of the Superintendent of Financial Institutions (OSFI) made its annual decision on the mortgage stress test. What does it mean if you’re a home buyer or homeowner? Read on to find out.

Stress Test 2022

The Mortgage Stress Test Stays at 5.25%

OSFI recently made its annual decision on the mortgage stress test. It can you’re not aware, OSFI made the decision earlier this year to examine the mortgage stress test rate each December before the start of the next year to determine whether a change is warranted.

There was a lot of speculation about what would happen this time around. With average Canadian house prices hitting an all-time high of $720,850 in November 2021, many wondered if OSFI would raise the mortgage stress test rate to help cool what has been a super-hot real estate market ever since the start of the pandemic in March 2020.

Well, we have the answer. Despite speculation, OSFI has decided to leave the mortgage stress test rate at 5.25%. Canada’s Finance Department, which decides the stress test rate for insured mortgages, decided to leave the stress test rate at 5.25% as well.

How the Mortgage Stress Test Could Still Affect You

The federal government seems less concerned about the mortgage stress test right now and more concerned with investment properties. The feds have real estate investors clearly in their crosshairs. The feds plan to take a tougher stance on investment properties.

While homebuyers and homeowners can breathe a sigh of relief, the mortgage stress test could still affect you in 2022. That’s because you must qualify at the greater of 5.25% or your mortgage rate plus 2 percent. If fixed rates continue to rise, you could see your home buying power start to diminish as a result.

If you have a household income of $100,000, you currently qualify to borrow $470,000 in mortgage money. (This is assuming annual property taxes of $4,000, $100 per month for heat, no condo/maintenance fees and a 25 year amortization.)

However, if fixed mortgage rates reached 3.75% at some point in 2022, which is possible, you’d have to qualify at 5.75% (3.75% + 2% = 5.75%). You’d qualify for $20,000 less in mortgage funds then; $450,000 instead of $470,000.

The mortgage stress test rate of 5.25% also isn’t written in stone. OSFI can decide to change it whenever it wants during the year based on current market conditions.

The Bottom Line

Are you curious how much you qualify for based on the current mortgage stress test? Reach out to our mortgage experts for a helping hand.

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