Rate Hikes Hit You Twice
When the Bank of Canada bumps its benchmark rate, the prime rate at every major lender moves with it. Most people think about one thing: their monthly payment goes up.
But if you're out shopping for a home, the impact runs deeper. A rate increase can quietly knock you out of the running for properties you thought you could afford.
The Stress Test Changes the Math
In Canada, every mortgage application goes through a federal rule called the stress test. You don't qualify at the rate you'll actually pay — you qualify at that rate plus 2%, or at 5.25%, whichever is higher.
Here's what that looks like in real life. Say you and your partner earn $120,000 before tax and have $50,000 saved for a down payment. Your property taxes and heat will run about $775 a month, and you carry no other debt.
Without the stress test, a 2.95% rate on a 25-year mortgage would let you buy a home for $750,000. But when you qualify at 5.25%, your maximum drops to $602,500. That's $147,500 less house.
So as the Bank of Canada pushes rates higher, the qualifying rate climbs too — and the amount you're allowed to borrow shrinks, even if your income and down payment stay the same.
Lock In Before Rates Move
The good news: you can protect yourself while you're still looking. When I set up your pre-approval, I can secure a 90- to 120-day rate hold. That means the lender commits to honouring that rate for a set window, even if rates climb in the meantime.
No one knows exactly when rates will move, but if they're trending up, a pre-approval costs you nothing and locks in your buying power. And if rates happen to fall before you find your place, you're not stuck — you can take the lower rate instead.
Getting pre-approved is free, fast, and the smartest hedge you have when the market's uncertain. If you're serious about buying in the next few months, now's the time to nail down what you qualify for.
