OSFI considers new regulations aimed at reducing housing market risks

The Office of the Superintendent of Financial Institutions (OSFI) will consider new limits for firms’ mortgage lending in an effort to protect the national financial system. Such a change will probably become another challenge for the real estate market.

According to Superintendent Peter Routledge, a review of mortgage-underwriting regulations that starts this week will look beyond today’s stress test requiring borrowers to qualify for a higher interest rate than their bank can offer.

Routledge says the minimum-qualifying rate test has already reduced the risks to financial institutions from high consumer indebtedness, but there are more tools the OSFI can use.

“We need to understand whether it’s enough”, – he noted. “That’s why we will look at a broader range of debt-serviceability tools, such as debt-to-income limits, debt-service constraints, and today’s interest-rate stress test tool.”

Ignoring the calls for easing its rules, the OSFI kept the stress test, requiring borrowers with uninsured mortgages to qualify at a rate 2% higher than the bank’s offered rate or 5.25% (the higher one is chosen).