Caution urged on expanding mortgage stress test

The CEO of Mortgage Professionals Canada is urging the country's banking regulator to back off expanding new mortgage rules.

A year ago, a stress test was introduced forall insured mortgages to ensureaborrower's ability to make their mortgage payments at a higher interest rate.

Insured borrowers are now tested against their ability to pay their mortgage if actual rates were as high as the big bank'sfive-year posted mortgage rates.

That requirement was already in place for many borrowers, including so-called "high-ratio" mortgages for people with small down payments, and borrowers who borrowed money on terms of less than five years.

The Office of the Superintendent of Financial Institutions'new proposed guidelinesinclude stress tests for uninsured mortgages loans secured with a deposit of at least20 per cent on the value of the home.

Thosehomebuyerswill now have to show that they can withstand a two per cent increase on their contractualmortgage rate. This would apply tovariable and fixed-rate mortgages, regardless of term.

Mortgage Professionals Canada CEO Paul Taylor is touring the Atlantic region discussing the proposed change, and he is asking the government to slow down.

"I think we probably need a little more time in light of the most recent changes to just let the marketplace breathe and figure out its new balance," said Taylor.

Taylor said the current rules are already making it difficult for first-time buyers to get into the housing market.

The Office of the Superintendent of Financial Institutions wasaccepting comments until Aug.17.It said it will finalize the guidelines and set an effective date for implementation later in 2017.

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