OFSI considers new mortgage rules

The Office of the Superintendent of Financial Institutions (OSFI) launches public consultations on the current and newly proposed mortgage lending rules, stating that the loan risks have intensified sharply since the beginning of the COVID-19 pandemic.

According to OSFI, the consultations on the B-20 mortgage underwriting rules will focus on changes aimed at making sure borrowers can cope with their debts properly.

The main part of today’s rules is the minimum qualifying rate, also known as the mortgage stress test: borrowers have to qualify for a mortgage at a 5.25% rate or at a contract rate plus 2% (the higher one is chosen).

OSFI says although this measure has been quite efficient, more measures may be necessary to decrease mortgage lending risks. It’s considering a few different variants.

The Office wants to get feedback on the idea to test borrowers on a loan-to-income and debt-to-income basis. Such changes would limit debt payments as a percentage of the borrower’s income. In addition to it, an interest rate affordability test is proposed – it would expand the existing stress test model.

This week, Peter Routledge, head of OFSI, noted that he wanted to take more measures for solving the issue of systemic vulnerabilities including the recent growth of debt levels.