Big banks in Canada are calling for reform to the industry’s mortgage stress test due to the uncertainty of the COVID-19 pandemic. As of now, the overnight mortgage rates are not even built into the five-year mortgage rate, which could even more detrimental effects on the already predictable housing downturn. A new stress test will benefit Canadian home buyers since their financial futures are still up in the air, and as experts have said, the worst of the pandemic has yet to come.
- As the economy begins to reopen, it makes sense to start the stress tests that were stopped earlier
- There are many reasons to start the new tests, including the forecasted dip in the market
- It’s necessary to start the tests now to minimize any future damage to homeowners
“Continuing to pause the previously announced changes leaves in place an unnecessarily punitive, pro-cyclical and suppressive minimum qualification rate that is more than double the expected interest rate most borrowers would pay.”