While it’s been a challenge to buy a home in Canada’s most expensive cities for years, things got a little more challenging on Jan. 1 when a new mortgage test was introduced for all uninsured mortgage borrowers.
Canada’s biggest banking regulator, the Office of the Superintendent of Financial Institutions (OSFI), implemented the test, which requires all uninsured mortgage borrowers to qualify at either the Bank of Canada’s five-year benchmark rate (currently just above 5 per cent), or at their contract mortgage rate plus an additional 2 per cent.
That’s taken quite a chunk out of the budget for some potential homebuyers. Because of this, some have largely opted out of the market in the first half of the year, as sales continue to drop on a year-over-year basis.
Economists are predicting that it will take at least another quarter for the market, and Canadian buyers, to adjust to the test.
The good news? Prices are down in some of Canada’s priciest markets for the first time in years. So, buyers who are able to pass the stress test could be able to score some deals while the market is (relatively) cool.