OSFI leaves mortgage stress test unchanged

  12/15/2022 |   SHARE
Posted in Home Buyers by Eileen Farrow | Back to Main Blog Page

Stress Test unchanged

Canada’s banking regulator confirmed today it will leave the mortgage stress test for uninsured mortgages unchanged.

In its annual review of the minimum qualifying rate (MQR) used by federally regulated lenders, the Office of the Superintendent of Financial Institutions (OSFI) said the MQR has provided a margin of safety to mortgage borrowers and has better prepared them in dealing with rising rates over the course of the year.

“This margin of safety made it easier for Canadian homeowners to continue to pay their mortgages and stay in their homes when rates started rising,” Tolga Yalkin, Assistant Superintendent at OSFI, said during a media call.

He added that the MQR is one of the reasons residential mortgage defaults remain near historic lows.

“In an environment characterized by sustained high inflation, rising mortgage interest rates, and potential risks to borrower incomes, it’s prudent that lenders continue to test borrowers for adverse conditions,” he said.

While today’s decision was expected, there have been growing calls for OSFI to revisit how the mortgage stress test is applied. With interest rates for uninsured mortgages⁠—those with a down payment of at least 20%⁠—nearing 6%, it means new borrowers at federally regulated lenders must prove they can afford payments based on an interest rate of nearly 8%.

OSFI was asked if there’s a concern that the more challenging qualification conditions may drive more homebuyers—who otherwise qualify at today’s contract rates—to alternative lenders, which generally come with higher mortgage rates.

“When we consider the basis of the MQR, we’re really looking at the risks to the financial institutions that we regulate,” Yalkin said, “ultimately with the aim of protecting borrowers and creditors and their interests and rights.”

Source: Canadian Mortgage Trends



Canada Living, First Time Home Buyers, OSFI, Stress Test



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