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As Canadians experience economic uncertainty during the COVID-19 pandemic, many prospective home buyers looked forward to one piece of relief that has since been cancelled.
Bill Morneau, the federal finance minister, announced in February that Ottawa was relaxing mortgage qualification rates for insured mortgages, those where the homeowner had made a down-payment of less than 20 per cent. The new policy was slated to come into effect April 6, a bright spot in a bleak landscape that was eagerly awaited by many clients of the Wilson Team of mortgage professionals.

However, then came the pandemic. The federal finance department had planned to set up a new benchmark interest rate for use in determining whether potential homeowners qualified for an insured mortgage. The benchmark rate would have been based on actual borrowing costs, rather than on the rates being advertised, making it more responsive to changes in lending interest rates. It would have been calculated at the weekly median five-year fixed rate from mortgage insurance applications, plus two per cent. The current stress test refers to the Bank of Canada’s average posted interest rate, or the mortgage applicant’s contracted
rate plus two per cent, whichever is the higher. Buyers seeking both insured and uninsured mortgages are subject to the current stress test.

In a statement, Morneau said, “For many middle-class Canadians, their home is the most important investment they will make in their lifetime. Our government has a responsibility to ensure that investment is protected and to support a stable housing market.” Unfortunately, after the Bank of Canada cut its interest rate by 50 basis points on March 13, the second
cut made by the bank in nine days, the Office of the Superintendent of Financial Insurance (OSFI) announced that the planned change will be suspended indefinitely. In addition, OFSI has suspended all consultations about the possibility of changes to a stress test for uninsured mortgages.

No indication has been given about when the change to the stress test will come into force. “Suspending the change to the stress test is a disappointment for many prospective homeowners,” says Kelly Wilson, co-founder of the Wilson Team of mortgage professionals. “During this precarious time, any type of financial relief is welcome news for buyers, and they will be even more frustrated if lenders’ rates don’t reflect the rate cuts made by the Bank of Canada.”

Despite the suspension of changes to the stress test, the Wilson Team is committed to helping prospective homeowners find the best possible mortgage rates during the pandemic.
“The real estate market continues to be active despite the pandemic,” says Wilson “and the Wilson Team is working diligently to ensure that our clients obtain the best mortgage rates possible given the regulations that are in place.”

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