Mortgage Insurers Drop 'Illogical' Proposal to Force Borrower Requalification

This is because the recent rate increase pushed all available five-year variable rates above the threshold where they could be effectively stress tested. That didn’t sit well with insurers — but the suggestion prompted sharp warnings from the mortgage industry of deep consequences for borrowers with firm deals.

In a statement to STOREYS, the CMHC stated, ”Given the rising interest rate environment, the mortgage insurers have collaborated to provide clarification regarding the application of the minimum qualifying rate on a Variable Rate Mortgage that are impacted by interest rate increases prior to loan funding.

However, the fact that such a proposal was in talks at all has the mortgage industry scratching its head. There’s consensus that it was a highly illogical suggestion that would be felt deeply throughout the marketplace with a domino effect among failed deals. However, as both fixed and variable mortgage rates have risen sharply since March, many of today’s borrowers are being stress tested in the 6-8% range, which has greatly reduced their homebuying power.

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