Why the recent mortgage rate hikes are lowering the qualifying amount

Author: Sleep Easy Financial | | Categories: First Time Home Buyer Mortgage , mortgage , Mortgage Agent , Mortgage Broker , Mortgage Pre-Approvals , Mortgage Rates , Mortgage Refinancing , Mortgage Renewal

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With the many increases to mortgage rates recently, mortgage borrowers are finding they are qualifying for lower mortgage amounts than they were just one month ago. This is true even in the absence of any change to the rate used by the dreaded Mortgage Stress Test.

The Mortgage Stress Test rate still stands at 5.25%. This is the lowest rate that can be used to determine your maximum mortgage amount. However, there is another part to the Stress Test that says we need to use the higher of 5.25% or the actual mortgage rate plus 2%. With most mortgage rates now above 3.25%, this means we are now using a qualifying rate in excess of 5.25%. For example, at the time of this writing, TD Bank's 5-year fixed rate starts at 3.69% and Scotia's 5-year fixed rate starts at 3.64%.

All else being equal, compared to a month ago, a family with a household income of $100,000 will see their maximum mortgage qualifying amount reduced by nearly $22,000 at TD Bank and just over $19,000 at Scotia Bank. Over the past 2 years, I have seen countless situations where homebuyers have lost out on a home by less than these amounts.

This has caught not only prospective homebuyers by surprise but also homeowners who waited to refinance their homes as they are also subject to the Mortgage Stress Test. 

Unfortunately, at the moment, there is no end in sight to these mortgage rate hikes and they are expected to continue at least for the remainder of the year. This means with each rate hike, the maximum mortgage qualifying amount will be further reduced each time.

Fortunately, if you're looking to (or need to) squeeze every dollar out of your mortgage, we have a few strategies that will still get you the same amount you would have qualified for a month ago. We will be happy to go over these strategies with you.


Sleep Easy Financial has access to 90+ mortgage lenders including the big banks. We beat the banks’ mortgages and our services are at no cost to you as we get paid by the lenders. Whether it’s for your next home purchase, mortgage renewal or refinance, our licensed mortgage professionals are committed to getting you your lowest rate so you save as much money as possible. We help you at every stage of the journey and are with you for the life of your mortgage. Be mortgage savvy and let us shop your next mortgage for you. Contact us or schedule your complimentary consultation today.

Sleep Easy Financial mortgage and home financing services are available across Mississauga, Brampton, Cooksville, Malton, Etobicoke, Scarborough, East York, North York, Toronto, Hamilton, Milton, Markham, Woodbridge, Vaughan, Ajax, Pickering, Kitchener, Richmond Hill, Whitby, Oshawa, Guelph, and the surrounding areas. Learn about our mortgage services or get in touch with us.


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