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Mortgage Regulation | OSFI launches Public Consultation

Canada’s banking regulator on Thursday announced the launch of a public consultation on existing and newly proposed mortgage rules, saying the risks associated with such loans have increased significantly since the start of the COVID pandemic.


The Office of the Superintendent of Financial Institutions (OSFI) said the advisory on guidelines for B-20 mortgage underwriting will look at measures to ensure borrowers will be able to manage their debt.

A key part of the current rules is the minimum allowed rate, known as a mortgage stress test or stress test, which requires borrowers to qualify for a mortgage higher than the contractual mortgage rate plus two percentage points, 5.25%.

In search of new measures

While OSFI found this protection to be beneficial, it believes more may be needed to reduce mortgage risk and has offered several options.

In particular, he says he is seeking feedback on the possibility of developing loan-to-income ratio and debt-to-income ratio measures that would limit debt payments as a percentage of a borrower’s income, as well as stress tests on the affordability of interest rates. , which would exceed the current stress test model.

Earlier this week, OSFI observer Peter Routledge used his appearance at a Conference of Banking Chiefs hosted by Royal Bank to say he wants to be proactive in addressing concerns because systemic vulnerabilities, including high debt levels, have increased in recent quarters.

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