Exciting news in the world of mortgage lending!
As of May 25th, 2020 the Bank of Canada's Benchmark Qualifying Rate is dropping from 5.04% to 4.94%. What the heck does that mean? Well if you are looking to buy, and were planning to put less than 20% down on a property, this means that you can qualify for a higher purchase price than you could before.
Remember back in 2018 when the Bank of Canada was trying to cool the insane markets in Toronto and Vancouver? Basically, in order to restrict lending in these markets the Bank of Canada implemented a "stress test". If you put less than 20% down you are required to purchase Goverment backed mortgage insurance. Then your mortgage broker has to ensure that you qualify at an interest 5.04% to get a mortgage. Yes, your actual rate may have been 2.9% but they wanted to know that your income could support interest rate increases up to 5.04%. That really reduced some people's ability to qualify for a mortgage for the price of home they were looking to get into.
Minister Morneau has now reduced that stress test rate to 4.94% which will allow borrowers to qualify for a higher purchase price than they could last week. For more information on that you can click through here.
Rates continue to drop and lending is easing slightly but it is always best to see your Mortgage Broker as a first step in the home buying process...even if you already own a home.