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Effective April 19, 2010,Canadian Department of Finance implemented some changes on how CMHC insures a mortgage against any defaults.

It clearly stated that "Canadian Department of Finance require that all borrowers meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term. This initiative will help Canadians prepare for higher interest rates in the future."

Simply saying that if anyone wants a variable rate mortgage then the borrower has to qualify for a Bank of Canada posted rate.

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)