The bar is now higher for homebuyers to qualify for mortgages in Canada after the central bank raised a key metric used in stress tests that determine borrowers’ eligibility.



The Bank of Canada raised the conventional five−year mortgage rate from 5.14 per cent to 5.34 per cent after all Big Six banks raised their posted five−year fixed mortgage rates in recent weeks.

The central bank qualifying rate is separate from the actual mortgage rates offered by banks to borrowers, but is used to assess homebuyers who are seeking loans. Homebuyers with less than a 20 per cent down payment seeking an insured mortgage must qualify at the central bank’s benchmark five−year mortgage rate.

And as of Jan. 1, buyers who don’t need mortgage insurance are required to prove they can handle payments at a qualifying rate of the greater of the central bank’s five−year benchmark rate or two percentage points higher than the contractual mortgage rate.

Mortgage broker Samantha Brookes says a higher qualifying rate means some homebuyers now qualify for a smaller loan than they would have before.