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  • Frank Tian

🇨🇦 OSFI to Tighten Mortgage Lending 🏠

In the face of the rising risk in the mortgage market, the Canadian financial regulator OSFI is soliciting feedback on more restrictive underwriting rules.


In a meeting held earlier this week (Jan), bank CEOs provided the latest info:


Scotia: 20,000 or 2.5% of mortgage customers at risk.


RBC: >50% of variable rate holders reaching trigger rates.


Other banks see similar impacts from the rate hike.


OSFI has put a buffer in its policy: borrowers need to qualify under the higher stress test rate and the actual rate plus 2.00%. But it is not enough when the market experienced a 400 bps rate hike in a year.


Bank of Canada published an analysis last November - estimating 65% of variable rate and fixed payment mortgage holders to reach trigger rates in 2023.


The policymaker has to react - when such a large scale of negative amortization is happening.


The additional risk measures in discussions:

- Interest rate affordability stress tests

- loan-to-income / debt-to-income restrictions

- debt-service coverage restrictions


Sources: Toronto Star

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