Borrowers will enjoy a sliver of extra buying power
The Bank of Canada is set to reduce its qualifying rate ten basis points, from 5.04 to 4.94 percent, sources tell Mortgage Broker News. After the decrease, which is expected to be announced by Monday, the five-year fixed mortgage rate will have inched another step closer to a level not seen since 2016, when it was reduced to 4.64 percent.
It's a small change to be sure, but in the current environment, says BMO chief economist Doug Porter, every bit helps.
“Any change can make a difference at the margin, even if tiny,” he says. “I believe the much bigger issue for the housing market will be the broader economic outlook and the extent to which activity and jobs can recover as the re-opening progresses. Rates still matter, but much less so than in the recent past.”
John Vo of Spicer Vo Mortgage doesn’t expect the decrease to work wonders for his clients, but he applauds the Bank of Canada for the move all the same.
“Is it going to make a huge difference in affordability?” Vo asks. “No. But it’s encouraging to see that the Bank of Canada is cautiously looking at ways of helping people qualify.”
Centum Intouch Mortgage Solutions broker Anthony Venuto sees the lower qualifying rate as being primarily helpful to borrowers are on the verge of receiving funding who still need a slight boost.
“It’s not like a person was going to qualify for $500,000 and all of a sudden they can qualify for $550,000,” he says.
But the extra few thousand dollars the lower qualifying rate may provide could be a game-changer for first-time buyers, especially at a time when so many of them are struggling to set enough capital aside for down payments and closing costs.
Venuto thinks the lower rate may have one more benefit.
“With those posted rates changing on the five-year fixed, that’s going to help Canadians if they potentially have to break their mortgages with their institutions, because [the competing rates] might be lower,” he says.