Edmonton homes are actually even cheaper due to a brand new stress check
A new “stress test” has made it much more difficult for aspiring homebuyers in Canada to secure a mortgage.
Starting Tuesday, the federally mandated stress test that all homebuyers in Canada must pass to be eligible for a mortgage was raised to a new high. Now borrowers must qualify for a mortgage at 5.25% interest, or your interest plus 2%, whichever is greater. The new degrees are around half a percent above the previous 4.79% test.
The stress test has been around since 2017 when it was introduced to cool the glowing market by forcing buyers to qualify at a higher price than they would actually pay. It does not make a mortgage more expensive, but rather restricts qualifications. It is used regardless of the amount of a deposit.
Although interest rates are currently historically low – some as low as 1.7% to 2% for five years – new analysis by Zoocasa shows how the new stress test will drive even more homebuyers out of the market.
According to the analysis, homebuyers across the country would face a 3.8% decline in affordability, meaning that they save between $ 14,000 and $ 47,000 in the amount of mortgage they can qualify for. It also means that borrowers will have to make approximately $ 2,000 to $ 9,000 more annually to qualify for a mortgage of the same size under the new stress test.
In Edmonton, in particular, where the average home price is $ 355,808, the qualifications of buyers looking to secure a mortgage are reduced by an average of $ 13,875 and must have $ 3,000 in additional income.
Edmonton’s increasing pricelessness ranks ninth in the country, level with Winnipeg. Vancouver saw the largest difference in qualification versus average home price at $ 47,170. To qualify for a mortgage on the average home, buyers there must earn $ 9,000 more annually than the previous stress test.
House prices across Canada have skyrocketed over the past year. The heightened stress test is aimed at cooling the market and reducing the amount of risky mortgage debt currently held by Canadians.