Are rising rates raising the bar?

2018-05-14 | 15:40:43

Anyone trying to qualify for a typical mortgage in Canada has just had the bar raised another couple of notches.  The big banks have been bumping up their five-year fixed rates for the past couple weeks.  Now the Bank of Canada is following suit with an increase to its qualifying rate.

The central bank’s conventional, five year mortgage rate now stands at 5.34% up 20 basis points from 5.14%.  It is the fifth increase since May of last year.  The Bank’s benchmark interest rate has be raised just three times, over about the same period, (since July ’17).

The qualifying rate is separate from consumer mortgage rates but it is an important benchmark in light of the B-20 stress test that was imposed on non-insured mortgage holders, back in January.  The new rules require that even home buyers with at least a 20% down payment must qualify for a mortgage at the BoC qualifying rate, or at 2% more than the rate they have negotiated with their bank, whichever is higher.

Market watchers point out that, as usual, the increase will hit first time buyers the hardest.  It will make borrowing more expensive and it will reduce the amount buyers can, ultimately, qualify for. 


Residential Market Commentary by courtesy of First National Financial LP.