Benchmark Qualifying Rate
Bank of Canada benchmark qualifying rate is 5.04%
as of August 12, 2020.
Bank of Canada overnight rate target is 0.25%
What is it?
Banks and lenders use benchmark rate to qualify clients for variable mortgages and mortgages with a less than a 5 year term.
For example, lets say you are applying for a variable rate mortgage with a rate of 2.50%.
The lender will review the application at 5.04% instead of the 2.50%, to see if you will be able to make payments in case the interest rates go up.
So, while your actual mortgage rate will be 2.50%, the bank will base their approval of your application on the higher qualifying rate.