# QUESTION: How do rising interest rates and HELOCs impact affordability?

> Rising interest rates and Home Equity Lines of Credit (HELOCs) significantly influence mortgage affordability, requiring careful consideration during underwriting.

Category: Investor
Last verified: 2026-04-14
Source: https://ratellow.com/faqs/investor/question-how-do-rising-interest-rates-and-helocs-impact-affordability

## Answer
Given the unique features of HELOCs relative to traditional residential mortgages, FRFIs should ensure appropriate mitigation of the associated risks of HELOCs, including the ability to expect full repayment over time, and the need for increased monitoring of a borrower's credit quality. FRFIs must limit the non-amortizing HELOC component of a residential mortgage to a maximum authorized LTV ratio of less than 65 percent. HELOCs are subject to stricter regulatory requirements.

Consider this scenario: you have a substantial HELOC, and interest rates rise. Their TDS ratio may increase significantly, potentially impacting their ability to qualify for a new or refinanced mortgage. HELOC authorized amount should be reviewed where any material decline in the value of the underlying property has occurred and/or the borrower's financial condition has changed materially. It's crucial to understand the potential impact!

## Institutional highlights
- When figuring out how much you can afford, use conservative calculations that account for different financial situations and potentially higher interest rates.
- To qualify for a mortgage, you'll need to meet a qualifying interest rate, which is either your actual mortgage interest rate plus a buffer, or a minimum rate. Keep an eye out for updates to these rates!
- Lenders will carefully monitor your credit if you have a Home Equity Line of Credit (HELOC) to ensure you can repay it.
- The amount you can borrow with a HELOC is limited to 65% of your home's value.
- Your lender may review your HELOC limit if your home's value drops significantly or your financial situation changes.

## Related guide
- https://ratellow.com/guides/rental-income-offsets

## Sources
- Property value used for the LTV ratio — https://www.osfi-bsif.gc.ca/en/guidance/guidance-library/residential-mortgage-underwriting-practices-procedures-guideline-2017
- Guarantors and co-signors of mortgages — https://www.osfi-bsif.gc.ca/en/guidance/guidance-library/residential-mortgage-underwriting-practices-procedures-guideline-2017#2.3.2
- Footnotes — https://www.osfi-bsif.gc.ca/en/guidance/guidance-library/capital-adequacy-requirements-car-guideline-2026