In Metro Vancouver, where the gap between incomes and home values makes the region an unaffordable outlier in North America, buyers are especially prone to get hit with unintended consequences of so-called mortgage stress testing.
The test was introduced earlier this year by Canada’s banking regulator to keep homebuyers from taking on risky levels of debt. But the result is reduced buying power that changes what first-time homebuyers can purchase.
It is also affecting people hoping to use an existing mortgage when moving from one property to another.
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“If you are selling a place for $750,000 and you have a mortgage of $500,000 and want to buy another place for $1.1 million, you can’t just (necessarily) ‘port’ that mortgage. It doesn’t automatically move,” says Gary Serra, a real estate agent who specializes in downtown and east Vancouver.
If “you have to re-qualify based on the stress test, you may not qualify to borrow (to that level now).”
Maybe, that person’s borrowing limit is $400,000 now. Even carrying over gains in equity, it may not be enough to get a mortgage on the higher-priced property, he says.