If the Benchmark Rate is the Same, Why is it Harder to Qualify?
In 2016 when the Government mortgage stress test rate was introduced, the rules around it were to qualify under the HIGHER of:
1) The base Government benchmark rate (5.25% as of May 2/22) OR;
2) The mortgage rate/term you want plus 2%
So it isn't harder to qualify because there has been any Government rule changes for homebuyers in this regard. We just got so used to the low rates that option #2 had never kicked in. Until now. With the fixed rate increases, as of today 5yr insured best is 3.89% + 2% = 5.89% qualifying rate. Of course the higher the qualifying rate, the harder it may be to qualify.
This "kick in" of option #2 has made the variable mortgage more attractive, as with it, you still qualify in option #1 at 5.25%. While this shouldn't be the basis on why you choose variable vs fixed, it's good to know the variable is a great product and throughout history, has been the best place for consumers to be. Please see a free pdf below (thanks to our friends at CMLS Financial) that shows you the history of fixed vs variable mortgage rates. To me, it showed pretty clearly that the variable is truly the cheapest at any point in time and therefore how/why it has historically been a good option for consumers.
Any questions I am always happy to help, thanks for reading!
Edmonton Mortgage Broker
TMG The Mortgage Group