New Stress Test On Insured Mortgages

Diane Buchanan • February 18, 2020

Minister Morneau Announces New Benchmark Rate for Qualifying For Insured Mortgages

The new qualifying rate will be the mortgage contract rate or a newly created benchmark very close to it plus 200 basis points, in either case. The News Release from the Department of Finance Canada states, “the Government of Canada has introduced measures to help more Canadians achieve their housing needs while also taking measured actions to contain risks in the housing market. A stable and healthy housing market is part of a strong economy, which is vital to building and supporting a strong middle class.”

These changes will come into effect on April 6, 2020. The new benchmark rate will be the weekly median 5-year fixed insured mortgage rate from mortgage insurance applications, plus 2%.This follows a recent review by federal financial agencies, which concluded that the minimum qualifying rate should be more dynamic to reflect the evolution of market conditions better. Overall, the review concluded that the mortgage stress test is working to ensure that home buyers are able to afford their homes even if interest rates rise, incomes change, or families are faced with unforeseen expenses.

This adjustment to the stress test will allow it to be more representative of the mortgage rates offered by lenders and more responsive to market conditions.

The Office of the Superintendent of Financial Institutions (OSFI) also announced today that it is considering the same new benchmark rate to determine the minimum qualifying rate for uninsured mortgages.

The existing qualification rule, which was introduced in 2016 for insured mortgages and in 2018 for uninsured mortgages, wasn’t responsive enough to the recent drop in lending interest rates — effectively making the stress test too tight. The earlier rule established the big-six bank posted rate plus 2 percentage points as the qualifying rate. Banks have increasingly held back from adjusting their posted rates when 5-year market yields moved downward. With rates falling sharply in recent weeks, especially since the coronavirus scare, the gap between posted and contract mortgage rates has widened even more than what was already evident in the past two years.

This move, effective April 6, should reduce the qualifying rate by about 30 basis points if contract rates remain at roughly today’s levels. According to a Department of Finance official, “As of February 18, 2020, based on the weekly median 5-year fixed insured mortgage rate from insured mortgage applications received by the Canada Mortgage and Housing Corporation, the new benchmark rate would be roughly 4.89%.” That’s 30 basis points less than today’s benchmark rate of 5.19%.

The   Bank of Canada will calculate this new benchmark weekly, based on actual rates from  mortgage insurance  applications, as underwritten by Canada’s three default insurers.

OSFI confirmed today that it, too, is considering the new benchmark rate for its minimum stress test rate on uninsured mortgages (mortgages with at least 20% equity).

“The proposed new benchmark for uninsured mortgages is based on rates from mortgage applications submitted by a wide variety of lenders, which makes it more representative of both the broader market and fluctuations in actual contract rates,” OSFI said in its  release.

“In addition to introducing a more accurate floor, OSFI’s proposal maintains cohesion between the benchmarks used to qualify both uninsured and insured mortgages.” (Thank goodness, as the last thing the mortgage market needs is more complexity.)

The new rules will certainly add to what was already likely to be a buoyant spring housing market. While it might boost buying power by just 3% (depending on what the new benchmark turns out to be on April 6), the psychological boost will be positive. Homebuyers—particularly first-time buyers—are already worried about affordability, given the double-digit gains of the last 12 months.

If you have any questions, please don’t hesitate to contact me anytime!

This article was written by Dr. Sherry Cooper DLC’s Chief Economist.

DIANE BUCHANAN
 Mortgage Broker

LET'S TALK

Your Guide to Real Estate Investment in Canada

By Diane Buchanan • March 11, 2026
Your Guide to Real Estate Investment in Canada Real estate has long been one of the most popular ways Canadians build wealth. Whether you’re purchasing your first rental property or expanding an existing portfolio, understanding how real estate investment works in Canada—and how it’s financed—is key to making smart decisions. This guide walks through the fundamentals you need to know before getting started. Why Canadians Invest in Real Estate Real estate offers several potential benefits as an investment: Long-term appreciation of property value Rental income that can support cash flow Leverage , allowing you to invest using borrowed funds Tangible asset with intrinsic value Portfolio diversification beyond stocks and bonds When structured properly, real estate can support both income and long-term net worth growth. Types of Real Estate Investments Investors typically focus on one or more of the following: Long-term residential rentals Short-term or vacation rentals (subject to local regulations) Multi-unit residential properties Pre-construction or assignment purchases Value-add properties that require renovations Each type comes with different financing rules, risks, and return profiles. Down Payment Requirements for Investment Properties In Canada, investment properties generally require higher down payments than owner-occupied homes. Typical minimums include: 20% down payment for most rental properties Higher down payments may be required depending on: Number of units Property type Borrower profile Lender guidelines Down payment source, income stability, and credit history all play a role in approval. How Rental Income Is Used to Qualify Lenders don’t always count 100% of rental income. Depending on the lender and mortgage product, they may: Use a rental income offset , or Include a percentage of rental income toward qualification Understanding how income is treated can significantly impact borrowing power. Financing Options for Investors Investment financing can include: Conventional mortgages Insured or insurable options (in limited scenarios) Alternative or broker-only lenders Refinancing equity from existing properties Purchase plus improvements for value-add projects Access to multiple lenders is often crucial for investors as portfolios grow. Key Costs Investors Should Plan For Beyond the purchase price, investors should budget for: Property taxes Insurance Maintenance and repairs Vacancy periods Property management fees (if applicable) Legal and closing costs A realistic cash-flow analysis is essential before buying. Risk Considerations Like any investment, real estate carries risk. Key factors to consider include: Interest rate changes Market fluctuations Tenant turnover Regulatory changes Liquidity (real estate is not easily sold quickly) A strong financing structure can help manage many of these risks. The Role of a Mortgage Professional Investment mortgages are rarely “one-size-fits-all.” Lender policies vary widely, especially as you acquire more properties. Working with an independent mortgage professional allows you to: Compare multiple lender strategies Structure financing for long-term growth Preserve flexibility as your portfolio evolves Avoid costly mistakes early on Final Thoughts Real estate investment in Canada can be a powerful wealth-building tool when approached with a clear strategy and proper financing. Whether you’re exploring your first rental property or planning your next acquisition, understanding the numbers—and the lending landscape—matters. If you’d like to discuss investment property financing, run the numbers, or explore your options, feel free to connect. A well-planned mortgage strategy can make all the difference in long-term success.

Fixed vs. Variable Mortgage Rates in Canada

By Diane Buchanan • March 4, 2026
Fixed vs. Variable Rate Mortgages: Which One Fits Your Life? Whether you’re buying your first home, refinancing your current mortgage, or approaching renewal, one big decision stands in your way: fixed or variable rate? It’s a question many homeowners wrestle with—and the right answer depends on your goals, lifestyle, and risk tolerance. Let’s break down the key differences so you can move forward with confidence. Fixed Rate: Stability & Predictability A fixed-rate mortgage offers one major advantage: peace of mind . Your interest rate stays the same for the entire term—usually five years—regardless of what happens in the broader economy. Pros: Your monthly payment never changes during the term. Ideal if you value budgeting certainty. Shields you from rate increases. Cons: Fixed rates are usually higher than variable rates at the outset. Penalties for breaking your mortgage early can be steep , thanks to something called the Interest Rate Differential (IRD) —a complex and often costly formula used by lenders. In fact, IRD penalties have been known to reach up to 4.5% of your mortgage balance in some cases. That’s a lot to pay if you need to move, refinance, or restructure your mortgage before the end of your term. Variable Rate: Flexibility & Potential Savings With a variable-rate mortgage , your interest rate moves with the market—specifically, it adjusts based on changes to the lender’s prime rate. For example, if your mortgage is set at Prime minus 0.50% and prime is 6.00% , your rate would be 5.50% . If prime increases or decreases, your mortgage rate will change too. Pros: Typically starts out lower than a fixed rate. Penalties are simpler and smaller —usually just three months’ interest (often 2–2.5 mortgage payments). Historically, many Canadians have paid less overall interest with a variable mortgage. Cons: Your payment could increase if rates rise. Not ideal if rate fluctuations keep you up at night. The Penalty Factor: Why It Matters More Than You Think One of the biggest surprises for homeowners is the cost of breaking a mortgage early —something nearly 6 out of 10 Canadians do before their term ends. Fixed Rate = Unpredictable, potentially high penalty (IRD) Variable Rate = Predictable, usually lower penalty (3 months’ interest) Even if you don’t plan to break your mortgage, life happens—career changes, family needs, or new opportunities could shift your path. So, Which One is Best? There’s no one-size-fits-all answer. A fixed rate might be perfect for someone who wants stable budgeting and plans to stay put for years. A variable rate might work better for someone who’s financially flexible and open to market changes—or who may need to exit their mortgage early. Ultimately, the best mortgage is the one that fits your goals and your reality —not just what the bank recommends. Let's Find the Right Fit Choosing between fixed and variable isn’t just about numbers—it’s about understanding your needs, your future plans, and how much financial flexibility you want. Let’s sit down and walk through your options together. I’ll help you make an informed, confident choice—no guesswork required.