Bank of Canada benchmark interest rate goes down to a three-year lowest mark

Great news for Canadians who plan to purchase a property: the benchmark five-year mortgage rate posted by the central bank was down for the third time this year, making it easier for some borrowers to pass a stress test.

According to the Bank of Canada, the rate fell to 4.79%, following 4.94% in May and 5.04% in March.

James Laird, the president of CanWise, noted it’s a win for certain borrowers.

“In case you only barely couldn’t qualify for a mortgage, now you have more chances to get what you wanted”, – he says.

“This change will help you qualify for just a little more than you could before.”

As you’ve already noticed, mortgage rates have been dropping recently.

Although most borrowers don’t pay even close to the benchmark posted rate for a mortgage, it’s still used for a mortgage stress test.

This test is used to make sure homebuyers will be able to make their payments in case of a future rate increase. That’s why this decline makes the test slightly easier.

With a 4.94% qualifying rate, a household with an annual income of $100,000, a 10% down payment and a five-year fixed mortgage rate could have qualified for a $523,410 mortgage, while now the sum goes up to $531,230.

Laird believes the decrease could be expected, as underlying rates are falling, and posted rates tend to follow.

However, he says the change isn’t significant, as it doesn’t affect those who were qualifying without a problem or those who were not close to qualifying.