October 4, 2016

Bank Of Canada New Mortgage Rules

October 3rd Announcement by the Finance Minister’s Office

Big news on the mortgage front as the Bank of Canada has announced qualification changes effective October17th 2016 by implementing an interest rate stress test to all insured mortgages. The main change is directly related to the qualification rate at which buyers use to obtain financing for insured fixed mortgages on terms of 5 years or longer.

Currently and up to October 17th, buyers can qualify for a fixed rate mortgage for terms 5 years or longer using the actual rate given by the lender (contract rate). With the change that is being put in place, all buyers that are looking for an insured mortgage will now be required to qualify at the Bank of Canada’s bench mark rate, which is currently at 4.64%.

What does this mean for buyers purchasing an insured mortgage before and after October 17th?

For buyers with a pre-approval (currently at their maximum qualifying ability under their current lenders contract rate for a term 5 years or longer) they have until October 16th to submit an accepted purchase agreement to their lender to qualify.

On the contrary- For buyers as mentioned above whom do not submit an accepted offer by October 16th to their lender, they will then be required to re-write their pre-approval qualifying at the Bank of Canada’s bench mark rate(currently at 4.64%).

At the end of the day, purchasing power for consumers after October 17th looking for a fixed rate mortgages will  decrease on average about 20%. As the qualifying interest rate rises to 4.64%, this will lower the pre- approval amount for buyers which have previously been measured against their lenders contract rate, (currently in the neighbourhood of 3.29- 3.39%).

If you’re one of the buyers who’s currently on the fence for purchasing in the near future, if anything this should shove you off and get your accepted offer in before the changes take in effect on October 17th 2016.

Please feel free to contact me with any questions or concerns regarding the above.For more information on the above changes and other news, please click this link.


Jonathan Pittis

Mortgage Planner

Mortgage Architects