The Big Five Banks and Canada's Biggest Builders Just Agreed on One Thing: the Mortgage Stress Test Is Locking Out First-Time Buyers of New Homes
It’s not every day that Canada’s largest banks and major homebuilders jointly ask Ottawa to make it easier for first-time buyers to purchase new homes. But that’s the message from a new industry report, and changing the mortgage stress test is one of its proposals.
If you’re saving for a first home, especially a townhome or semi in Peel, the report recognizes a challenge you may already know: the mortgage payment you expect to make and the higher payment used to assess your application can be very different.
The important caveat? These are recommendations, not changes to the rules. Nothing changes unless the government acts. You can still take practical steps today to understand your options and prepare with confidence.
What the mortgage stress test means for you
In simple terms, the stress test asks you to show that you could manage mortgage payments at a qualifying rate higher than the rate on your mortgage. The test generally uses your contract rate plus two percentage points, subject to the rules that apply to your mortgage.
For example, imagine a $600,000 mortgage at a 5% contract rate. Under a contract-rate-plus-two test, you would need to qualify as if the rate were 7%. This is an illustrative example, not a mortgage quote. Your lender assesses your full application, including income, debts, and housing costs.
That higher qualifying rate can reduce the amount you’re approved to borrow, or mean you don’t qualify for the loan you had in mind, even if you believe you could comfortably make the actual payments. A real pre-approval can help you understand your current qualifying room.
Why the industry is calling for a more flexible test
The National Housing and Investment Initiative report was released November 10. Compiled by the Building Industry and Land Development Association (BILD) and The Missing Middle Initiative, it sets out 29 recommendations across four areas: long-term investment, credit risk, immigration policy, and housing data.
It was endorsed by all five major Canadian banks (RBC, CIBC, BMO, TD and Scotiabank) and 10 homebuilders: Mattamy Homes, Minto Group, Menkes Developments, Polygon Homes, Brookfield Residential Properties, Tricon Residential, The Remington Group, Cantiro Homes, BGO Properties and Wesgroup Properties.
As reported by The Globe and Mail’s Rachelle Younglai on November 10, the report describes the stress test as a useful safeguard, but says it may be too blunt when it excludes otherwise creditworthy buyers. Its proposal is a sliding qualifying rate that could account for mortgage term, market conditions and buyer type, including an easier qualifying rate for first-time buyers purchasing newly built homes.
The timing matters. On October 28, the Bank of Canada raised its policy rate to 2.50%, its first hike in more than three years. The next scheduled decision is December 9. The policy rate is not your mortgage rate, and mortgage rates do not necessarily move in lockstep with it. But when a borrower’s contract rate rises, the qualifying rate can rise too, making it harder to qualify for the same mortgage amount.
Four proposals that could affect buyers and new homes
Alongside a sliding stress test, the report recommends:
Down-payment assistance. The report proposes assistance programs for first-time buyers, as well as further reductions in minimum down-payment requirements for eligible buyers of new homes.
Mortgage-interest deductibility. It suggests a capped mortgage-interest deduction for owner-occupied new-construction homes as one possible way to help buyers. The report also discusses how capital-gains tax treatment could work when those homeowners sell.
Construction financing. The report proposes low-cost federal financing or guarantees for condo, townhome and single-family construction. Federal low-cost financing currently focuses on rental-only buildings.
Lower presale hurdles. In the Toronto region, developers often need to sell at least 70% of a project’s units to qualify for construction financing. The report suggests federal backing could help lower that threshold. Wesgroup CEO Beau Jarvis noted that builders would still need to be comfortable completing projects with unsold units.
These ideas connect buyer qualification with the supply of homes you can choose from. As BMO’s James Burrow put it in the report’s coverage, federal backing could play a role during the construction phase, which can be among the riskiest stages of development.
What it could mean for Peel buyers
If you’re a first-time buyer looking at a townhome or semi in Brampton, Mississauga or Caledon, the proposed easier qualifying rate for new builds is particularly relevant. It is not a general change for every buyer or every home. The proposal is specifically aimed at first-time buyers purchasing newly built homes.
The local new-home pipeline illustrates why access to buyers matters. A proposed 567-home community near Highway 50 in Bolton includes 192 single-detached homes, 375 townhomes, a park and a school block. It is a proposal, not an approved or under-construction development, but it shows the type of housing supply that could serve buyers looking for more space and a ground-oriented home.
More financing flexibility could help qualified buyers consider new homes, while construction financing could help viable projects move forward. Neither outcome is guaranteed. If you’re comparing a new build with a resale home, review the price, timing, contract terms and financing with the right professionals.
The construction-financing proposal also matters beyond the GTA. In Muskoka and Parry Sound, smaller builders working on new cottages or contract homes can face financing challenges too. Lower presale requirements or federal backing, if adopted, could affect how some projects are financed. That is a possible future impact, not a change you can count on today.
These are recommendations, not new rules
The report is intended to inform Ottawa’s housing policies. Its proposals have not been adopted. The stress test has not been relaxed, and proposed down-payment assistance, tax changes and construction-financing support should not be treated as available programs.
You can plan around the rules in force today. If you’re exploring existing options, qualifying first-time buyers and purchasers of new homes may be eligible for insured mortgages with amortizations of up to 30 years. Expanded insured-mortgage access also covers eligible homes priced below $1.5 million. Eligibility and terms depend on the applicable rules and your circumstances.
For a helpful overview of current options and policy context, read our Budget 2026 buyer-financing explainer. Ask a mortgage professional to confirm which rules apply to you.
What you can do now
- Get a real pre-approval. Ask a mortgage professional to assess your current qualifying room and explain what information they need from you.
- Explore options already available. Ask about insured-mortgage eligibility and 30-year amortization options, if applicable to your situation.
- Compare new builds with resale homes. Consider price, timing, contract details, location and the costs of ownership.
- Prepare using today’s rules. Treat proposed reforms as proposals until they are formally adopted.
Prepared buyers are better positioned in any market. The report is encouraging because the people who provide mortgages and build homes are publicly asking for a more workable path for first-time buyers. That does not guarantee a policy change, but it validates the questions you may have, and preparation gives you more clarity while Ottawa considers its next steps.
For general information only. Mortgage qualification and program eligibility depend on your circumstances and applicable rules. Speak with a mortgage professional for guidance on your situation.
Sources and further reading
- The Globe and Mail: Banks, developers urge Ottawa to relax mortgage rules for first-time buyers of new homes
- BILD / The Missing Middle Initiative: National Housing and Investment Initiative report
- Bank of Canada: October 28, 2026 rate announcement
- CMHC: Residential Mortgage Industry Report, Fall 2026
Let’s plan your next move
Call 416-817-8110, email info@apbains.com, or visit www.apbains.com. Thanks for reading. I look forward to working with you.
AP Bains | CENTURY 21 Green Realty Inc. Brokerage