How Rising Interest Rates Could Affect Your Mortgage
It’s official! Interest rates are steadily rising, which could eventually cool down home prices as people’s purchasing power erodes. However, for now, it’s created uncertainty and affected the Stress Test significantly.
The Stress Test was introduced in 2018 and specified that when brokers qualified a borrower, they had to use the GREATER of a mandated qualifying rate (MQR), which is currently 5.25% of the contract rate, plus an additional 2%.
When rates were below 3.25%, no one felt the burden so much since both fixed and variable rates would use the minimum qualifying rate (MQR) of 5.25%.
Unfortunately, since fixed rates are rising and have already reached up to 4.14% at many banks, people must qualify at 6.14% (contract rate plus 2%) instead of 5.25%.
Therefore, people are qualifying for 16.9% less than what they would have got just one month back. In addition, house prices have recently gone up, so it’s a double whammy for home seekers looking to jump on the property ladder.
Homeseekers worried about further rate increases should get a pre-approval locked in now to give themselves some time if they’re actively shopping. I can get rates held for 120 days which will save you from having to qualify at an even higher rate in the short term.
So, if you’re looking to secure a mortgage in Vancouver, BC, or are interested to learn more about the rise in interest rates, get in touch with Rowan Smith Mortgage Broker – City Wide Mortgage Services today.
I’ve worked in the mortgage industry for over two decades, helping clients get the best rate and terms to suit their unique financial position. It includes doing a complete verification of income and debts so that my clients know where they stand before going shopping for homes.
My services include pre-approvals, home purchase mortgages, construction mortgages, private lending, equity mortgages, renewal/ refinance, and debt consolidation. I also assist my clients with self-employed mortgages.
I serve clients across Vancouver, Yaletown, Burnaby, Richmond, Coquitlam, Surrey, and South Surrey. I also cover White Rock, Langley City, Fort Langley, Langley Township, Aldergrove, Abbotsford, Chilliwack, Hope, and the surrounding areas.