Bank of Canada has lowered the Mortgage Qualifying Rate
The Bank of Canada has to lowered the qualifying rate for the first time in 3 years from 5.34 per cent to 5.19 per cent. Until now the Bank of Canada’s qualifying rate has been on a rise from 4.64 percent in September, 2016.
According to calculations by mortgage rate comparison site RateHub.ca, someone with an annual household income of $100,000 with a 20 per cent down payment and a five-year fixed mortgage of 2.70 per cent amortized over 25 years would have previously qualified for a mortgage on a home valued at $589,000. Now, under the same conditions, they’d be approved a mortgage on a home costing $597,000 – a difference of $8,000, or 1.4 per cent more home.
“Although the relaxed rate is small, every little bit helps. For those who have been borderline on their TDSR limits this will help them with home ownership.” Pat Dell, Mortgage Broker at Verico Crown Mortgage states; “Hopefully we will see more changes going forward. Changes in extended amortization would be another great way to help with qualifications”
The qualifying rate is used in stress tests for both insured and uninsured mortgages, and a lower rate means it is easier for borrowers to qualify. It is important to note that changing the new rules on mortgage does not make paying off any easier. Homebuyers should consult with a financial consultant to make sure they don’t bite more debt than they can chew.