If people can’t afford a place because of the stress test, they should not have bought the place in the first place. If their finances can’t accommodate for 2 percent rate increase, they are financially irresponsible and are taking on too much risk. I know people want a detached house and they feel they are entitled to have one. But if buying a house means that their financial stability is at the mercy of rising interest rate, they need to adjust their expectations and deal with living in a condo.

It’s unfortunate that people are too stupid to stress test their own finances and the government has to step in this way. But left to their own devices, people will bring down the whole economy with their irresponsible borrowing.

One will be locked with the financial institution where mortgage exists and will be at the that institution’s mercy to re-finance or not. Since there will be no chance for most to pass the stress test with other banks, bank which holds current mortgage will be able to dictate the rate and terms it desires.

Very unfortunate chain of events is happening, neither first time home buyers nor those who were putting aside 20 percent for their down payment will be able to afford anything other than a condo unit, which at this point is not a cheap solution either. Will be forced to rent and rents have gone up lately as well. This situation will bring a shortage of inventory to a real estate market as home owners would not want to sell lower than what their mortgage amounts are.

The question is why all these rules within such a short time period? Is this a healthy solution for an overall state of economy at this point which lately was heavily dependent on a real estate market?

Renewing with the same lender, no. But refinancing or changing lenders, yes.

thanks for that. By requiring FRFI’s to have a clearly defined risk-based approach, does this in any way put the Banks in a position of greater responsible for potential defaults? Could their risk based approach being selling collateralized debt elsewhere rather than lending at rates as if they held the loan entirely on their books?

“Expectations around new loan documentation and adjudication for mortgage loan renewals have not changed, and FRFIs are not expected to re-apply the qualification rate assessment to existing borrowers that are renewing mortgages.

OSFI expects FRFIs will have a clearly defined risk-based approach for current and future mortgage renewals and will remain responsible for deciding what level of due diligence and review to place on borrowers’ qualifications at the time of renewal. FRFIs’ renewal practices should be articulated in internal policies governing their underwriting of residential mortgage loans. ”

Its here: http://www.osfi-bsif.gc.ca/Eng/fi-if/rg-ro/gdn-ort/gl-ld/Pages/b20_dft_let.aspx

OSFI draft indicated the stress test would be at the discretion of the lender if it is a refinancing. Bad news for Canadians unless there is further regulation to keep the big 5 honest and maintain some form of competitive lending. Definitely want to know what made it in there!