Mortgage, Money and Dream – Our thoughts on Canadian Mortgage Market
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bond-yield-qualifying-rate-5.24-January-2014The lenders in a recent rate reduction move – pulled the qualifying rate down by a tiny fraction – 0.1% – from its previous 5.34% to 5.24%.

Does it really matter much? In one word no! – for borrowers who do not push the boundary of their borrowing capacities. A reduction in the qualifying rate will enable some borderline home buyers to afford a bit more if they are looking for a less than three years term.

This reduction comes almost after a year of the last reduction we saw in 2013. In between (March and November 2013 while the rate was at 5.14%) bond yields went up and down many times but the qualifying rate did not budge.

It is not the bond market that is real driving factor for the qualifying rate but it is business volume that drives qualifying rates.

Qualifying rate is a must follow for the banks but for the credit unions it is a different story. They do not always are required to qualify a variable rate borrower by the qualifying rate. So borrowers always have ways to get what they want may be at slightly different rate.

Some lenders are qualifying the borrowers on the three years posted rates (fixed) for three years fixed mortgage. So, the rate change will not change the landscape by a lot.

Mortgage rates change almost daily in the banks. Any sharp drop or jump in the bond yield influences the fixed mortgage rates almost instantly. So, regardless of the rates posted by the big lenders, the actual offered rates are often less than those.