Lenders use a mortgage ‘stress-test’ to ensure that homeowners will continue to be able to afford their homes should interest rates rise, in the event of a job loss, or some unforeseen event taking place (such as a pandemic). The formula used is based upon the benchmark rate set by the government of Canada. Minister Morneau announced the new benchmark rate will be the average 5-year fixed term mortgage rate posted by the largest Canadian banks plus 2%.
CRA publishes prescribed interest rates each quarter. If you are in arrears to the government, for example, late in paying your income tax instalment, you will be charged interest.