Effective May 14, 2018, the Bank of Canada is changing its 5 Year Benchmark Qualifying Rate to 5.34% from 5.14%.
What you need to know:
- The 5-year benchmark qualifying rate or “STRESS TEST“, published by the Bank of Canada, was put into legislation mainly to ease affordability concerns and mitigate the payment shock that may impact lower term and variable rate customers. The idea behind the stress test is to make sure homeowners can afford their mortgages at a time when interest rates are going up.
- Home-buyers with less than a 20% down payment seeking an insured mortgage, from the Canada Mortgage and Housing Corporation (CMHC) must qualify at the central bank’s benchmark five-year mortgage rate.
- Home-buyers who don’t need mortgage insurance must prove they can make payments at a qualifying rate of the greater of either 2 percentage points higher than the approved mortgage rate or the central bank’s five-year benchmark rate.