STEVE HUEBL -- Borrowers, with insured mortgages, will need to prove they can afford monthly payment based on the weekly median 5-year fixed insured rate plus 2%
FIRST PUBLISHED in Canadian Mortgage Trends The federal government announced on Tuesday it will be changing the benchmark qualifying rate used for Canada’s insured mortgage stress test. The change, which will take effect April 6, 2020, means borrowers with insured mortgages (typically those with less than 20% equity) will need to prove they can afford monthly mortgage payment based on a rate equal to the weekly median 5-year fixed insured mortgage rate plus 2%. The Department of Finance (DoF) confirmed that rate would currently equal 4.89%, 30 basis points less than today’s benchmark qualifying rate of 5.19%, which is based on the Big 6 banks’ posted 5-year fixed rates. Critics say the big banks have been keeping their 5-year fixed posted rates artificially high since they are used in setting prepayment penalties. But with mortgage rates falling since last year, the mortgage stress test has been increasingly out of sync with the actual contract rates consumers ...