They (The government) are finally on the right path! Its not perfect but definitely moving in the right direction.
So what’s changed and when does the change start?
The When: April 6, 2020
What’s changed ?
Currently the stress test was derived from the 5 year posted rate of the big 6 banks (That is the number they use to determine your penalty if you were to break your fixed rate mortgage).
Now it will be the country’s median 5 year fixed insured-mortgage rate plus 2% (Still waiting to hear which lenders will be in on this calculation). So what does that actually mean for you? Well currently the average 5 year fixed rate is approx. 2.69% (As of March 1, 2020) so the qualifying rate would be 4.69%, Currently the qualifying rate is at 5.19% That is a 50 basis point difference!! (There are 100 basis points in a percentage). This rate will be re-evaluated weekly
How will this effect you? Well that will be based on where rates are but just using the figures above it’s a minimum of 3%-5% increase in purchasing power (That’s $12000-$20,000 on a $400,000 purchase!!) So if you were just short of your purchase price in the past or were waiting until you could afford a bit more home, the time is here to dust off those old pre-approvals and get them back online so you are ready when April 6 rolls around.
‘If you cannot do great things, do small things in a great way’