Mortgage Stress Test: Protecting Power in Rising Rates
#31

Mortgage Stress Test: Protecting Power in Rising Rates

In this episode of The Wisdom, Lifestyle, Money Show, host Scott Dillingham explains the mortgage stress test—qualifying at 5.25% or contract rate +2% (higher of)—and its erosion of purchasing power amid rising rates.

Scott discusses using variable rates (lower payments) to maximize approvals, then locking to fixed post-closing (no fees/penalties)—a strategy for aggressive buyers, but warns of risks if rates rise further.

He covers post-COVID rate hikes (variable up 0.25% already, targeting pre-COVID levels ~2.75%), housing supply shortages, and Ontario's foreign buyer tax increase to 20% province-wide to ease demand.

Advice: Get preapprovals now (spring/summer promotions), switch lenders for lower rates (e.g., variables qualify more), confirm post-expiry amounts—don't risk firm offers without verification.

In 2025, BoC at 2.25% (Oct 29 cut), prime 4.45%; averages: 5-year fixed ~3.69-4.44%, variable ~3.45-4.10%; Ontario prices down 6.7% YoY to ~$781K (Sept), sales up 12.9%—easing stress test with lower variables but ongoing supply issues favor quick action, per BoC, CMHC, TD, RBC.

This episode equips buyers to navigate 2025's rising rates and maintain power in Canada's tight market.

Guest Bio 
Scott Dillingham is the host of The Wisdom, Lifestyle, Money Show and founder of LendCity Mortgages in Windsor, Ontario, specializing in home and investment financing. With banking and brokerage experience, Scott offers strategies to maximize approvals amid rate changes. Passionate about education, he warns of pitfalls like eroding power. Connect with Scott at lendcity.ca, call 519-960-0370, or listen for mortgage insights.

Key Takeaways
  • Stress Test Basics: Qualify at 5.25% floor or rate +2% (higher)—protects against hikes but reduces power; e.g., 3.5% rate stresses at 5.5%.
  • Variable Strategy: Use low variable (~3.45%) for max approvals (lower payments), lock to fixed post-closing (no cost)—ideal for bidding wars, but consult pros for risks.
  • Rate Outlook: Post-COVID hikes targeting pre-levels (~2.75% variable); BoC 2.25%, prime 4.45%—act now before further increases shrink budgets.
  • Supply/Tax Impact: Ontario shortages persist; 20% foreign buyer tax (province-wide) aims to ease, but demand high—preapprovals key amid uncertainty.
  • Preapproval Tips: Check variable/fixed amounts; renew if expired (rates up erodes power); switch lenders for lower rates (e.g., 2s for fixed qualify more).
  • Firm Offers Caution: Avoid without full approval—rates/promotions change; spring/summer best for deals.
  • 2025 Market: Ontario prices ~$781K (down 6.7% YoY Sept), sales up 12.9%; easing test with variables, but rebounds expected—quick buyers win.
Resources and Links
Call to Action 
If Scott Dillingham's stress test strategies in 2025's rising rates help maximize your power, visit lendcity.ca or call 519-960-0370 for a preapproval. Share this episode with buyers facing eroding budgets—tag us on social media! What's your rate plan? Leave a review on Apple Podcasts or Spotify to aid others with 2025 trends, variable tricks, or tax impacts. Tune in next week for more on smart financing.
  • (00:03) - Introduction to the Stress Test
  • (08:39) - Eroding Purchasing Power
  • (10:24) - Strategies for Maximizing Your Purchasing Power
  • (14:34) - Timing Your Pre-Approval
  • (17:10) - Choosing the Right Lender

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