The Gulf Time Newspaper One of the finest business newspapers in the UAE brought to you by our professional writers and editors.
Bloomberg
A key Canadian interest rate used by lenders to determine who can qualify for a mortgage has dropped for the first time in almost three years, potentially giving the country’s housing market a near-term boost.
The Bank of Canada lowered its 5-year conventional mortgage rate to 5.19 percent, from 5.34 percent, where it had been since May 2018. It’s the first decrease since August 2016. The rate is an indicative measure based on average price quotes from financial institutions.
Lenders must use the benchmark, which is usually higher than the contract mortgage rate, to determine who can qualify for a mortgage. Borrowers are required to prove they can afford monthly payments at the benchmark rate or higher.
The so-called stress tests are part of tougher guidelines imposed by Canada’s banking regulator to ensure the quality of new loans after sharp price increases in some cities such as Toronto and Vancouver.
The guidelines have come under fire for causing an outsized slowdown in the housing market.