Which markets will be most affected by the new stress test?

Under the newly revised stress test, home buyers in Canada’s largest markets will see their mortgage qualification prospects hit the most, according to a new analysis by Zoocasa.

Effective at the beginning of this month, the Office of the Superintendent of Financial Institutions raised the qualifying rate for borrowers who have at least a 20% down payment from 4.79% to 5.25%. For perspective, Zoocasa estimated that current fixed and variable mortgage rates are as low as 1.7% to 2% for a five-year term.

On average, Canadian would-be buyers looking at average-priced homes in the nation’s urban markets would have to endure a 3.8% decrease in affordability. Zoocasa calculated that the amount Canadians would qualify for under the new rules will likely be between $14,000 and $47,000 less.

Assuming no additional debt, buyers with a 20% down payment and 30-year amortization will see the largest drop in their qualification in Greater Vancouver ($47,170 less), which had an average home price of approximately $1.211 million in April. This reduction will essentially compel them to supplement their income by $9,000 to qualify for the same mortgage under the new regime.

The next largest decline in qualification will be among buyers in Greater Toronto ($42,475 less), with an average home price of around $1.091 million and a requirement of $8,000 in additional income.

At the other end of the spectrum, the least affected will be buyers in Saskatoon ($13,661 less) and Winnipeg ($13,875 less), markets that offer average home prices of $347,616 and $353,377, respectively. Hopeful homeowners in both cities will need to augment their incomes by just $2,000 more to qualify for the same mortgages in the new environment.

MBN

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