OSFI keeps uninsured mortgage stress test level right where it is


Canada’s banking regulator has decided to keep the stress test level for uninsured mortgages right where it already is.

The Office of the Superintendent of Financial Institutions said Thursday morning that it has decided to keep the stress test level for uninsured mortgages at 5.25 per cent or two percentage points above their actual mortgage rate, whichever is higher.

The regulator has been under some pressure to lower the stress test level, which would make it easier to qualify for a loan. The purpose of the stress test is to ensure than anyone taking out a mortgage would be able to keep up with the payments even if their rate should increase rapidly, which is exactly what happened this year.

The Bank of Canada hiked its benchmark interest rate seven times in 2022, taking its rate from next to nothing to 4.25 per cent — it’s highest level since 2008.

But in its regularly scheduled annual review of the stress test, OSFI has decided that the current level is appropriate.

“Sound mortgage underwriting includes a margin of safety that ensures borrowers will have the ability to make mortgage payments in the event of negative financial shocks,” OSFI said. “In an environment characterized by rising mortgage interest rates … it is prudent that lenders continue to test borrowers for adverse conditions.”

Last week, OSFI Superintendent Peter Routledge responded to calls to lower or eliminate the minimum qualifying rate, saying the regulator sees great risk in speculating on the mortgage rate cycle and does not consider the stress test to be a tool to manage the demand for housing.

“In times of economic uncertainty with increasing vulnerabilities, the mortgage qualifying rate has and continues to be a key tool supporting sound mortgage underwriting,” assistant superintendent Tolga Yalkin said Thursday.


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