The Government of Canada recently announced changes to the stress test rate used to determine the minimum qualifying rate for insured mortgages.

Currently all insured mortgages (purchases with less than 20% down) qualify at the Bank of Canada 5 year Benchmark Posted Rate. This rate is currently 5.19%. So borrowers have to qualify at the rate of 5.19% even though they will be paying a much lower rate (less than 3% currently).

Going forward the new benchmark rate for insured mortgages will be the weekly median 5 year fixed insured mortgage rate from mortgage insurance applications plus 2%. These changes will come into effect on April 6, 2020. The benchmark rate will be published on a Wednesday and come into effect the following Monday.

So essentially you will now have to qualify at a rate that is 2% higher than the rate you are paying for insured mortgages only. For instance right now a typical insured mortgage rate is 2.79% and so you would have to qualify at a rate of 4.79%. This will give you a slight increase in what mortgage amount you qualify for as currently you have to qualify at 5.19% versus qualifying at a rate of 4.79% under the new rules.

For conventional mortgages where you have 20% down, there is no change to the rules so you still have to qualify at 5.19%. This will include purchases/refinances with 20% down for both owner occupied and rental properties.

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