QUALIFYING FOR A MORTGAGE IN 2020

The mortgage qualification stress test, introduced in January 2018, is still a hot topic in the world of real estate. I often hear industry professionals and consumers alike state that it has dampened the market and put first-time home buyers at a disadvantage.

With that in mind, it is interesting to learn that most consumers view the stress test in a positive light. The Canada Mortgage & Housing Corporation (CMHC) released a survey on November 15th which indicates that 65% of consumers approve of the stress test, believing that it will prevent Canadians from taking on too much debt that they potentially may not be able to afford should interest rates rise. CMHC tends to agree, deeming the stress test a success thus far. Not only has it added a measure to prevent Canadians from financially over-extending themselves, but it has also helped cool the GTA’s overheating real estate market.

As we enter 2020, I do not expect any significant changes to be made to mortgage qualification rules, especially considering our low interest rate environment. In simple terms, consumers will still need to qualify at their lender’s offered mortgage interest rate plus 2%, or the Bank of Canada’s five-year benchmark rate (whichever is greater) in order to qualify for a mortgage. It certainly looks as though the mortgage stress test is here to stay!

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As we enter 2020, I do not expect any significant changes to be made to mortgage qualification rules, especially considering our low interest rate environment. Looks like the mortgage stress test is here to stay.