Today, Minister of Finance, Bill Morneau, announced changes to the benchmark rate used to determine the minimum qualifying rate for insured mortgages, also known as the “stress test.”
News Release | Feb 18, 2020 – These changes will come into effect on April 6, 2020. The new benchmark rate will be the weekly median 5-year fixed insured mortgage rate from mortgage insurance applications, plus a two percent (2%) buffer.
Additionally today, the Office of the Superintendent of Financial Institutions (OSFI) announced that it is considering implementing the same benchmark rate of the weekly median five-year fixed insured mortgage rate from mortgage insurance applications, plus a two percent (2%) buffer for uninsured mortgages, which will align minimum qualification limits for the insured and uninsured mortgage market.
Mortgage Professionals Canada (MPC) has been recommending uncoupling the stress test rates from the Bank of Canada posted 5 year fixed rate since its introduction to the insured 5 year terms in 2016. Setting the floating rate on the insured contract rate will make the test more dynamic and responsive to market and bond rates. We thank the government for acknowledging this issue and making these changes. We do, however, still consider a two percent (2%) buffer to be an onerous test level given the economic realities globally.
MPC’s 5th Parliament Hill day takes place tomorrow in Ottawa, with over 50 meetings scheduled with MPs, Senators, and senior policy officials. Our member volunteers will thank the government for making this first, much-needed adjustment to mortgage qualification in Canada, and continue to ask for additional support measures for those most impacted by the introduction of these tests; aspiring middle-class Canadians and would-be first-time buyers. Included in our asks will be the reintroduction of an insurable 30-year amortization for first-time buyers, and increases in the income maximum multipliers under the newly introduced First Time Home Buyers Incentive Plan.
Source: Department of Finance Canada
Benchmark Mortgages Inc. is an Edmonton brokerage designed to establish meaningful long-term relationships with clients and help them achieve financial freedom faster with diverse and customized mortgage options. The term “benchmark” originates from the chiseled horizontal marks that surveyors made in stone structures as an established point of reference. By definition, it is a mark that serves as a standard by which others may be judged or measured.
About Mortgage Professionals Canada
Benchmark is an active member of Mortgage Professionals Canada, a non-profit, national mortgage industry association representing 11,500 individuals and 1,000 companies, including mortgage brokerages, lenders, insurers and industry service providers. Our members make up the largest and most respected network of mortgage professionals in the country whose interests we represent to government, regulators, media and consumers.
The mortgage broker channel originates more than 35% of all mortgages in Canada and 55% for first-time buyers, representing approximately $80 billion dollars in annual economic activity. With this diverse and strong membership, we are uniquely positioned to speak to issues impacting all aspects of the mortgage origination process.
The mortgage broker channel is a critical and valuable profession. It creates possibility, fuels the economy and provides Canadians with choice when making the most important financial decisions of their lives.