In July, the Bank of Canada lowered the mortgage qualifying rate or “Mortgage Stress Test,” to determine whether homeowners can qualify. This is the first drop in the MQR since 2016. The central bank's five-year benchmark qualifying rate is now 5.19 per cent, down from 5.34 per cent.
The qualifying rate is used in stress tests for both insured and uninsured mortgages, and the decrease will make it a little easier for borrows to qualify for a mortgage or a higher loan amount.
For Example: If you were pre-qualified for $400,000, that could possibly be increased to $410,000. Similarly, if you were just shy of qualifying for a mortgage loan, this decrease could help.
These stress test was created so that potential homebuyers would still be able to make mortgage payments if faced with higher interest rates or less income.
While the current decrease makes a small difference so far in affordability, it is a step in the right direction for potential homebuyers.
For more on how the Mortgage Qualifying Rate affects you-reach out to one of our agents to discuss.
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