Nearly 50% of mortgages in Alberta are up for renewal in 2018

If you’re an Albertan carrying a mortgage, there’s a good chance you’ll be renewing your mortgage this year. Nearly half of the pre-existing mortgages in the province are up for renewal in 2018.

“We’re very busy,” says John Taggart, a mortgage associate with Dominion Lending Centres. “We see a lot of people inquiring about rates looking to get new mortgages and looking to redo their renewals.”

Albertans looking to renew their mortgages this year may have to pass a new stress test. On Jan. 1, new federal guidelines kicked in which require the borrowers’ qualifying rate to equal the greater of either the Bank of Canada’s five-year mortgage rate (5.34 per cent) or the borrower’s contractual rate plus two percentage points.

For example, if your contractual rate for a five-year fixed mortgage is 3.7 per cent, you’ll technically have to qualify for a 5.7 per cent mortgage rate in order to pass the stress test.

“By making that gap in between what you qualify for and what you’re actually getting, the idea is to make it that if rates do rise by the end of your term, you’ll still be able to afford your mortgage,” Taggart says.

The stress test will impact both potential home buyers and people already carrying a mortgage.

READ MORE: Here’s the income you need to pass the mortgage stress test across Canada

Some new homebuyers will have to settle for less expensive houses because their maximum borrowing capacity will be limited due to the stress test.

People looking to renew their existing mortgage can avoid the stress test if they remain with their current lender. However, if you want to shop around for a better rate, you’ll be forced to pass the stress test.

The stress test should protect both current and future homeowners from the possibility of higher interest rates down the road. Mortgage rates are still relatively low from a historical standpoint, but a sharp rise in interest would impact people who overextended themselves financially.

“If you’re already stretched a bit thin or you go through a bit of a rough patch, and then all of a sudden your mortgage payment goes up by a couple hundred bucks, you’re definitely going to feel it,” Taggart says.

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