24 may 2010

Now the situation is different: the Big 5 banks’ posted qualifying rate is chosen (today it’s 6.10%).
Moreover, you can’t change lenders at renewal without requalifying. It means, if you don’t have 20% equity at maturity you have a chance to stuck in another 5-year fixed mortgage. If you want to change the type of rate or a term, you have to qualify for it, but under stricter guidelines.
Today’s qualifying rate (6.10%) is 435 (4.37%)  basis points above the level of what many borrowers are getting on new variable-rate mortgages. By the way, a few years earlier 150-200 bps was considered to be a good number.
The experts believe variable and short-term mortgages are often the best variant how to save borrowers’ money. Now many financially stable Canadians can’t choose it.
That’s why it’s a little bit intriguing that the government chose the posted 5-year fixed rate for its new qualifying rate.
It makes you wonder: is there a real threat of sustained 4.35%+ higher rates?  Or was it done for some other reason?