For the first time in three years, the Bank of Canada has lowered its five-year qualifying mortgage rate, from 5.34 per cent to 5.19 per cent.
This provides some slight relief for home buyers and mortgage renewers who have to pass the mortgage stress test, by qualifying at the posted rate or their contract rate plus two per cent, whichever is higher.
With average five-year fixed mortgages now under three per cent most fixed-rate mortgage applicants were still having to qualify at the higher 5.34 per cent posted rate. This remains true of the new lower rate of 5.19 per cent, but it does make it easier for applicants to qualify for their mortgage.
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The change was warmly welcomed by the mortgage industry. James Laird, co-founder of mortgage comparison service Ratehub Inc. and president of CanWise Financial, said, “The change in the Bank of Canada five-year benchmark rate now means that Canadians can qualify for more home today compared to earlier this year and 2018.This decrease alleviates some of the pressure on first-time homebuyers, who are the most financially strained Canadians entering the housing market.”