The single most important mortgage rate in Canada has finally dropped, years after the last decrease. The mortgage stress test rate, formerly at 5.34% is dropping to 5.19% on July 22, 2019.
The last time this rate was lowered was on September 7, 2016, even while 5-year fixed mortgage rates have been plummeting – even to below 5-year variable rates!
Many in the real estate industry, especially those who have been lobbying for a reduction, will be pleased to see this. Perhaps they’ll wish it went further, though.
Previously, no matter how low your mortgage rate was, you’d have to qualify at 5.34%. For a family with a $75,000 income and a $50,000 down payment, that means they could only qualify for a home worth $422,864. Now, they can qualify for a home worth $428,384. That’s an increase of $5,520, or 1.3%. Not a very large increase, for sure, but every little bit helps.
For borrowers with 20% down, they will see an increase of about 1.4% in affordability.
Borrowers with higher income will see their qualification have that same 1.3 – 1.4% increase, but since they qualify for more naturally, that increase represents a larger price jump. A couple making a combined $150,000 with a $100,000 down payment can now qualify for a home worth $927,255, up from $915,182, an increase of $12,073 (still about 1.3%).
To see what you qualify for now, check out our home affordability calculator.