By: Anuj Vohra

Anuj Vohra — Wed, 28 Sep 2022 18:10:43 +0000

I agree that a minority of borrowers who lost their income are extremely vulnerable. On the contrary, in my view, a majority of the recent buyer is not yet ‘highly vulnerable’. Going by the data published in the article, a typical borrower who got the rate of 1.3% – 1.4% was booked at prime minus 1.15-1.05% respectively.(prime rate being 2.45% since Mar 30, 2020 to Mar 02, 2022). Therefore, their mortgage is now charged at 4.3%- 4.4% respectively. (@ current prime 5.45% minus 1.15-1.05%). However, the Stress Test qualifying rates since March 18, 2020 fluctuated from 4.79% to 5.25%. ‘The Recent Buyer’ who bought their house on or after March 30, 2020 did qualify their mortgage at a Stress Test rate which was much higher than the rate of interest they are currently paying. They would continue to remain in the safe zone and should be able to absorb another shock of 0.49% to 0.80% of future rate increase. I do agree that they are for sure at risk if there is a major reduction in their household income over the last two years. Stress Tests, which appeared as a major pain-point then, has emerged now as a blessing in disguise for such households. Shall be looking for an answer to the question; whether Stress Test should continue in the same form or needs an overhaul for the future?

Comments on: A deep-dive into the mortgage stress tests: Did they serve their purpose?

By: Anuj Vohra