Benchmark Interest Rate

A benchmark interest rate is the reference rate lenders use to qualify borrowers and set mortgage terms, impacting affordability.

Benchmark Interest Rate

September 29, 2025


What is a Benchmark Interest Rate?

A benchmark interest rate is a reference rate used by lenders to determine mortgage qualification and pricing. In Canada, the Bank of Canada’s policy rate and the federal mortgage stress test benchmark are common examples.

Why a Benchmark Interest Rate Matters in Real Estate

Benchmark interest rates matter in real estate because they directly affect borrowing costs, mortgage qualification, and housing affordability. Changes to benchmarks ripple through the market, influencing demand and pricing.

Example of a Benchmark Interest Rate in Action

When the federal government raises the benchmark qualifying rate, fewer buyers qualify for mortgages, slowing demand in overheated housing markets.

Key Takeaways

  • Reference rate used for mortgage qualification and pricing.
  • Impacts affordability and borrowing capacity.
  • Changes influence demand and housing activity.
  • Common examples include Bank of Canada rate and stress test benchmark.
  • Key indicator for housing market performance.

Related Terms

Additional Terms

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