OSFI keeps the minimum qualifying rate unchanged

Today, the Office of the Superintendent of Financial Institutions (OSFI) decided not to change its qualifying rate for uninsured mortgages, ignoring calls for easing the requirements amid a drastic increase in interest rates seen in 2022.

OSFI keeps the conditions unchanged, meaning that borrowers will still have to prove their ability to pay off their mortgages at a rate of either 5.25% or their contract rate plus 2% (the higher one is chosen).

As interest rates went up significantly this year, most borrowers now are forced to qualify at a rate well exceeding 5.25%. Such conditions caused speculation that the stress test needs to be adjusted or eased.

Nevertheless, OSFI believes it’s “prudent” that borrowers keep facing tests for adverse conditions, and changes can be made whenever necessary.

“Amid economic uncertainty with growing vulnerabilities, the minimum qualifying rate continues to be the main tool supporting healthy mortgage underwriting,” – noted Tolga Yalkin from OSFI.

According to a December report by RBC Economics, although there was a “valid case” to cut the stress test’s qualifying rate, policymakers will hardly think about it this time.

RBC’s assistant chief economist Robert Hogue said OSFI would not risk stimulating real estate demand by easing the stress test, as such a decision would interfere with the central bank’s attempts to slow down the national economy and restrain inflation.