- the chartered bank 5-year posted rate (5.39% today), or
- the contract rate.
Currently lenders use qualifying rates that range from discounted 3-year fixed rates (like 3.29% today) to posted 5-year fixed rates (5.39% today).
Going forward, mortgages with terms of five years or more will use the contract interest rate. This is key because it suggests lenders will still be able to qualify insured 5-year fixed borrowers using heavily discounted contract rates (e.g., 3.75% instead of 5.39%, as of today).
CAAMP estimates that 30% of home buyers choose a 1- to 4-year term. With this new qualifying rate, some of those people will be forced into a 5-year term (and a very small number will no longer qualify at all).
For mortgages with multiple terms (e.g., hybrid mortgages), each term will be qualified using the applicable criteria above.
Based on the recent inquiries we're seeing from concerned borrowers, there may be a rush to get applications in under the old rules.