Stress Test Review: Two Months In
New Stress Test Regulations Changing the Housing Market
What a crazy few months it’s been in the mortgage arena. The newly launched B-20 Mortgage Stress Test shook things up as expected and is changing the landscape for buyers and lenders.
Created to curb the impact of increasing debt and rising home costs, the mortgage stress test is applied to ensure applicants with less than 20 per cent down on a house, can continue to carry an uninsured mortgage at a qualifying rate of the greater of the contractual mortgage rate plus two percentage points.
Almost two months into the new regulations, we are seeing a definite increase in rejected applications with the larger traditional regulated institutions. The Financial Post states rejections are up as much as 20%.
I have seen similar trends within the Burlington and Oakville mortgage markets. I have been working with clients negatively impacted by these new stress test regulations to strategize our approach to their applications. These new regulations have meant additional work on all fronts. Multiple applications and less options for mortgage lenders has also meant some clients have had to compromise on the contract details to secure an approval.
Not ideal, but it is our new reality and mortgage brokers are looking at innovative ways to minimize the impact for our clients. We have created stronger bonds with unregulated lenders who do not have to apply the same stress test rules to applicants. Credit unions and privatized lenders have been the biggest winners, seeing a significant influx in business.
You can be sure well be monitoring the continued impact.
Harrison White’s Tip: If you are concerned how the new stress test can impact you and your looking to secure a new mortgage or renew, let’s begin the process earlier than you’d think. Pre-planning and early submission of applications will give us time to respond and re-strategize if necessary and avoid panic decisions Let’s Talk. HW
If you require more information on the mortgage stress test or your mortgage application please contact HW Advantage by filling out the form below or calling 1-905-541-6961