More Borrowers Will Face Jumbo Stress Test Following Higher Rate Hikes

More Borrowers Will Face Jumbo Stress Test Following Higher Rate Hikes

 “Many homebuyers are not aware of this nuance, and it would affect their affordability even if home prices were to slow down or down over the next year,” says Leah Zlatkin, mortgage broker and expert at LowestRates.ca. 

She adds that this will effectively reduce competition in the mortgage marketplace, as more borrowers won’t be able to withstand being retested when switching lenders. “For those refinancing, a calculation above 5.25 per cent may mean they’ll need to stay with their current lender because they cannot afford to be stress tested at a higher rate. This eliminates the opportunity to shop around for better mortgage rates,” she says. 

According to Zlatkin, keeping in mind that each mortgage is different, the change to the stress test will generally be felt on mortgage rates starting at 3.26%; for every 0.25% increase above 5.25%, buyers can expect about $12,000 less in financing.