What is a 'stress test'?

In finance, planning for a worst-case scenario is called a stress test. It involves modeling a bad scenario before an investment is made. A mortgage stress test is a way of determining exactly how much you can afford (and under what circumstances). If your income was reduced or you lost your job, could you still afford to make mortgage payments? What if interest rates spike or you need to refinance your home?

RBC president and CEO Dave McKay said that a proposed tweak to a mortgage stress test could have a swift effect on the housing market.

Photo Credit: Financial Post

OSFI’s proposal is that borrowers would have to meet new requirements in order to qualify for a loan, and that they will now collect input on its proposal before publishing its finalized adjustments by May 24- with those changes coming into effect on June 1.

Learn more about OSFI's proposal and how this could affect the housing market.