As you have likely already been made aware, new guidelines with respect to qualifying rates on 5-year fixed mortgages will go into effect October 17th.
Traditionally, on a 5-year fixed term, borrowers would qualify at the contract rate, for example 2.44% as of today. Going forward, 5-year fixed mortgages will now need to be qualified at the benchmark rate, 4.64%. What does this mean to a borrower?
For the average Calgarian who has a household income of $98,600 and assuming they have no other debt payments that exceed 10% of their income;
Under the previous rules this client would qualify for a maximum mortgage of $529,157.93
Under the new rules this client will qualify for a maximum purchase price $419,515.43
The new rules will reduce the maximum mortgage amount for borrowers by approximately 20% based on todays rates.
That being said, we estimate that only 20% of our clients in the last 12 months would have been effected by this rule change. As a general rule our clients tend to purchase well below their means.
In order to take advantage of the old guidelines, clients will need to have lender and insurer approval before Oct 17th, anything submitted on or after that date will be subject to the new guidelines.
Please let us know if you have any questions.
