Purchasing a house is already a long and stressful process.  Many factors come into play for people to find their “dream home” and now the process has gotten a little tougher for people to purchase a house.

On June 1, 2021, the federal government implemented a new stress test for getting a mortgage in hopes to cool the housing market after COVID-19 forced banks to lower interest rates, leading to housing prices skyrocketing and rising demand.

Local RBC Mortgage Specialist Kathleen Novak explains the new stress test.

“They've raised the minimum financial bar that anyone applying for a mortgage must meet," said Novak.

Borrowers will now be tested against a 5.25 per cent minimum threshold compared to the previous 4.79 per cent.

"The stress test is just a minimum threshold that anyone applying for a mortgage in Canada has to meet,” added Novak.

Below is an example of what buyers can expect.

A buyer wanting to purchase a home costing $200,000, and they had a $40,000 down payment, they would need a $160,000 mortgage. At today's rates on a 5-year fixed, closed, and at a standard 25-year amortization, that mortgage payment would cost the buyer $880.08 a month.

Under the new rules, the mortgage application would be tested as though the rate was 5.25%. So at that rate, the mortgage payment would be $1191.84. 

The higher payment is not paid by the buyer, but if the buyer wouldn't be able to pay that extra $311.00 a month based on their income and their debt load, they wouldn't qualify for the mortgage.

It's a big deal for first-time homebuyers to buy their first house but how will this new stress test affect homebuyers in general?

“The effect on the market is to reduce the amount of buyers that can qualify so that it creates a cooler market,” Novak stated

Noval added, “If the market does come down, it could potentially, be good news for buyers if the house prices come down and I think that that would help first-time home buyers a great deal if the prices started to come down.”

 The lowest 5-year fixed mortgage rate to date is 1.69 per cent.