Canada’s banking regulator says it is considering whether to extend the scope of its mortgage guidelines to include existing mortgages.

OSFI (Office of the Superintendent of Financial Institutions) is a regulatory body in Canada that supervises and regulates financial institutions to ensure their safety and soundness. Recently, OSFI has proposed some changes to the mortgage rules that lenders must follow.

The proposed changes aim to tighten the mortgage underwriting standards to ensure that borrowers can afford their mortgage payments even if interest rates rise, and to address some of the risks associated with the current hot housing market in Canada.

Some of the key changes include:

  • A new minimum qualifying rate, which will be the greater of either the contractual mortgage rate plus 2%, or a new “floor” rate of 5.25%. This means that borrowers will need to show that they can afford to make mortgage payments based on a higher interest rate, even if they are getting a lower rate from their lender.
  • A tighter debt service ratio limit for uninsured mortgages, which will be reduced from the current limit of 44% to 42%. This means that borrowers will need to have a higher income relative to their debt payments to qualify for a mortgage.
  • Stricter requirements for verifying income and assessing the borrower’s ability to repay the mortgage.

Overall, these proposed changes are designed to make it harder for some borrowers to qualify for a mortgage, but they are intended to promote stability in the housing market and reduce the risks associated with high levels of household debt.