There’s been a lot of speculation surrounding this change. The new qualifying rate has been a big question mark ever since the Finance Department announced its new mortgage rules on February 16.

The posted qualifying rate will be published by the Bank of Canada each Monday at approximately 12:01am Eastern Time.

Currently lenders use qualifying rates that range from discounted 3-year fixed rates (like 3.29% today) to posted 5-year fixed rates (5.39% today).

Going forward, mortgages with terms of five years or more will use the contract interest rate.

This is key because it suggests lenders will still be able to qualify insured 5-year fixed borrowers using heavily discounted contract rates (e.g.,  3.75% instead of 5.39%, as of today).

If so, guess which term is going to grow in popularity?  Yes sir; the 5-year fixed.  It’ll be the easiest term to qualify for, for people with borderline debt ratios.

CAAMP estimates that 30% of home buyers choose a 1- to 4-year term. With this new qualifying rate, some of those people will be forced into a 5-year term (and a very small number will no longer qualify at all).

Keep in mind, these changes only apply to mortgages over 80% loan-to-value, says CMHC.  So if you’re putting down 20% or more, you probably won’t be affected.

Based on the recent inquiries we’re seeing from concerned borrowers, there may be a rush to get applications in under the old rules.

This information is courtesy of:

Krista Rumberg
Mortgage Specialist
Krista@MortgageSimple.ca
www.MortgageSimple.ca