The mortgage stress test requires banks to check that a borrower can still make their payment at a rate that’s higher than they actually pay.

With the 5 year posted mortgage rate tumbling, the Bank of Canada was compelled to downward revise their stress test level for the 3rd time since the pandemic hit, to 4.79%.
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This stress test level is essentially the level at which a borrower’s capability to repay is calculated by banks and was initially put in place to cool off the overheated real estate markets in 2017. This level, which is higher than the rate at which banks lend at, helps banks to determine if the borrower would still be able to pay back their loans even if the rates were to go up.

With the testing rate having gone down twice already in this pandemic, this essentially makes it borrowers to avail of a slightly bigger amount of mortgage even if their incomes remain the same. It comes as a breather for many Canadians who were finding it difficult to qualify for mortgage loans since the new rules were put in place.

As qualifying rates had moved up considerably quicker than it is now coming down, they have finally been pegged closer to real lending rates making the market more accessible for the first time home owner.