For all variable-rate mortgages and fixed terms under five years, the new qualifying interest rate will be the greater of:Previously when the Finance department tightened mortgage rules for CMHC loans, I thought they would be limited because of how low discount 5-year rates were. Now that it is the posted rate I think it will be successful limiting the amount of risk*** borrowers are capable of taking past April 19th. There is a concern of what impact this will have to the overall market but If the recent market strength was solely due to people stretching into 3% mortgages than a downturn was inevitable anyway.
- the chartered bank 5-year posted rate (5.39% today), and
- the contract rate.
***I misunderstood this rule - it actually only applies to those taking out terms under 5-year fixed. So the chance of rate shock occurring in 5 years to those stretching into the discount rate still exists. See previous post. At least this forces marginal buyers into 5-year terms.