Changes to the benchmark rate

Minister of Finance Bill Morneau has announced changes to the benchmark rate used to determine the minimum qualifying rate for insured mortgages.

Instead of the Bank of Canada 5-Year Benchmark Posted Rate, the new benchmark rate will be the weekly median 5-year fixed insured mortgage rate from mortgage insurance applications, plus 2%. These changes will come into effect on April 6, 2020.

The new benchmark rate will be published on a Wednesday and come into effect the following Monday.

The minimum qualifying rate for insured mortgages will now be the greater of the borrower’s contract rate, which is the mortgage interest rate agreed to by the lending institution and the borrower; or the new benchmark rate.

The new Benchmark Rate for insured mortgages will be published weekly on the Bank of Canada’s website, and will be based on submitted mortgage insurance application contract rates. If, on any given week, there are any delays in updating the new Benchmark Rate, the previous week’s published Rate will stand until a new Rate is published.

Today’s qualifying rate is 5.19%. If we were to apply the new rules today the qualifying rate would be approximately 4.89%. Reducing the qualifying rate from 5.19% to 4.89% increases borrowing power by approximately 2.0%.

An income of $100,000 will increase one’s borrowing power from $480,000 to $490,000.

Not sure how this is going to help borrowers in Vancouver but as I said in a previous email, it’s a start!

Please let me know if you have questions.


Katherine Martin
Mortgage Specialist