The Bank of Canada’s historic 100-bps rate hike last week has led to confusion over how the stress test should be applied to variable rate mortgage (VRM) applications already in lender pipelines.
Specifically, the question arose as to how mortgage applications that were approved by lenders and submitted to default mortgage insurers prior to last week’s Bank of Canada rate increase—and subsequent prime rate increase—should be handled.
On Tuesday, Canada’s three mortgage insurers—Sagen, CMHC and Canada Guaranty—issued a joint statement to provide clarification on the matter.
“For VRM loans where the lender has made a legally binding commitment to lend and has obtained an approval from the mortgage loan insurer, in the event of an increase to the VRM contract rate prior to funding, the lender is not required to resubmit the VRM…
