On August 12, the Bank of Canada lowered its 5-year conventional mortgage rate from 4.94% to 4.79% — the second time it’s reduced the qualifying rate in the last three months.

The last time was in May when the rate changed from 5.04% to 4.94%.

The most recent change to the benchmark qualifying rate will increase homebuyers’ affordability by 1.5%.

Since 2018, rule changes have made it harder for Canadians to qualify, so this recent reductions in the benchmark qualifying rate is welcome news for first-time homebuyers hoping to enter the housing market.

The decrease in the Bank of Canada’s 5-year benchmark rate is the result of the big banks decreasing their 5-year posted rates.

Take, for example, a couple with an annual income of $100,000 would have qualified for a conventional mortgage based on 30-year amortization for $547,000 under the original 4.94% qualifying rate. Under the new stress test, if they had a qualifying rate of 4.79%, they can now qualify for a mortgage of $556,000 — a total difference of $9,000 or 2% more.

If you are in the market to purchase a home, please feel free to reach out to me and I’d be happy to recalculate how much your buying power has increased using the new stress test rate.