By: Amir S. Ali

Recent developments in the Canadian housing market present a more nuanced picture than a simple downturn. While the federal mortgage stress test remains firmly in place—acting as a significant barrier to qualification—a key financial pressure has begun to ease. Major lenders have recently dropped their benchmark five-year fixed mortgage rates to approximately 4.04%, down from recent highs.

This creates a bifurcated reality. The stress test continues to limit purchasing power by requiring buyers to qualify at a rate roughly two percentage points higher than their contract rate. However, the lower actual borrowing costs improve monthly affordability for those who can clear the qualification hurdle.

For the well-prepared buyer with a strong down payment, stable income, and excellent credit, this combination presents a strategic opening. The market has cooled from its peak frenzy, reducing competition, while the lower carrying costs on a mortgage make long-term budgeting more sustainable. This is not a return to the easy credit of the past, but a recalibrated opportunity. It rewards financial discipline and positions those who are ready to act on quality assets that now offer better value and less speculative pressure.

The current landscape is defined by this balance: a persistent regulatory gatekeeper in the stress test, paired with improved financing conditions beyond it. For qualified buyers, this moment offers a more reasoned path to ownership.