As mortgages get more expensive with interest rates rising in Canada, the hurdle that some borrowers must pass is also getting higher.
The interest rate used by the Bank of Canada for mortgage stress-testing went up by 20 percentage points Wednesday to 5.34% from 5.14%, where it had been since mid-January of this year.
The rate used has now gone up five times since last May, when it stood at 4.64%
The central bank's rate is based on a survey of conventional five-year rates available at the big banks.
Under new rules that came in force with the dawn of 2018, all home buyers with high-ratio mortgages — those with a down payment of less than 20%of the price of the home — or an uninsured mortgage have to go through the mortgage stress test.
The test is based on qualifying for the greater of either the Bank of Canada qualifying rate or the buyer's contracted interest rate plus two percentage points.
Last week, several of Canada's major banks boosted their mortgage rates
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