Effective April 19, 2010,Canadian Department of Finance implemented some changes on how CMHC insures a mortgage against any defaults.
It clearly stated that
This rate essentially ensures that the borrower has the ability to pay if the interest rate goes up. Unfortunately it also kept a lot of borrowers at bay.
The qualifying rate is used to calculate a borrowers Gross or Total debt service ratio.
It is Bank of Canada who looks at the posted rate of the big Canadian banks every week (Wednesday). Then it calculates a benchmark rate from all those rates.CMHC then take this data and calculate the qualifying criteria of the borrowers. (Emili)