Canada’s banking regulator announced on Thursday the launch of a public consultation on existing and newly proposed rules for mortgages, saying the risks associated with such loans had increased significantly since the start of the COVID pandemic. -19.
The Office of the Superintendent of Financial Institutions (OSFI) said the consultation on Guideline B-20 mortgage underwriting rules will look at measures to ensure that borrowers will be able to manage their debts.
A key part of the existing rules is the Minimum Allowable Rate, otherwise known as a mortgage stress test or stress test, which requires borrowers to qualify for a mortgage at the higher of the contractual mortgage rate plus 2 percentage points. and 5.25%.
In search of new measures
While OSFI finds this safeguard has been helpful, it believes more action may be needed to reduce mortgage risk and has offered several options.
In particular, he says he is seeking comments on the possibility of putting in place measures related to the loan-to-income ratio and the debt-to-income ratio, measures that would limit debt payments as a percentage of the borrower’s income, as well as as stress tests on the affordability of interest rates, which would go beyond the current stress test model.
Earlier this week, OSFI Superintendent Peter Routledge used his appearance at a Royal Bank-hosted bank bosses conference to say he wanted to be proactive in addressing concerns because systemic vulnerabilities, including high debt levels, have increased in recent quarters.