Benchmark Rate Changes Bill Morneau Announcement

Author: Homeguard Funding Ltd. | | Categories: First Time Home Buyer Mortgage , Mortgage Broker

Mortgage Broker Bradford

Today, Minister of Finance, Bill Morneau, announced changes to the benchmark rate used to determine the minimum qualifying rate for insured mortgages, also known as the "stress test."

These changes will come into effect on April 6, 2020.  The new benchmark rate will be the weekly median 5-year fixed insured mortgage rate from mortgage insurance applications, plus 2%.

This follows a recent review by federal financial agencies which concluded that the minimum qualifying rate should be more dynamic to better reflect the evolution of market conditions.  Overall, the review concluded that mortgage standards are working to ensure that home buyers are able to afford their homes even if interest rates rise, incomes change, or families are faced with unforeseen expenses.  This adjustment to the stress test will allow it to be more representative of the mortgage rate offered by lenders and more responsive to market conditions.

The Office of the Superintendent of Financial Institutions (OFSI) also announced that it is considering the same new benchmark rate to determine the minimum qualifying rate for uninsured mortgages.  OSFI is seeking input from interested stake holders on this proposal before March 17, 2020.

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