Changes to the federal mortgage stress test, due to come into force April 6, have been put on hold indefinitely, the Office of the Superintendent of Financial Institutions (OSFI) has announced.
The federal financial regulator had previously announced that the stress test would be relaxed for insured-mortgage applicants. The new qualifying rate for insured mortgages (those with less than 20 per cent down payment) would have calculated at the weekly median five-year fixed rate from mortgage insurance applications, plus two per cent. This was intended to replace the current calculation, which is the Bank of Canada’s average posted interest rate, or the mortgage applicant’s contracted rate plus two per cent, whichever is the higher.
However, following the Bank of Canada’s emergency interest-rate cut on March 13 of 50 basis points, the second such cut in nine days in response to COVID-19, OSFI has suspended the change indefinitely.
The new lower interest rates may have a similar effect as the planned stress test relaxation, and OSFI may be attempting not to compound the effect.