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Noah Zivitz

Managing Editor, BNN Bloomberg


Canadian homebuyers aren’t about to face a tougher stress test when applying for a mortgage.

The Office of the Superintendent of Financial Institutions (OSFI) announced on Friday that it’s maintaining the minimum qualifying rate for uninsured borrowers (ie, those who put down at least 20 per cent up front) at the higher of their contract rate plus two percentage points or 5.25 per cent. 

“In an environment characterized by increased household indebtedness and low interest rates, it is essential that lenders test their borrowers to ensure that mortgages can continue to be paid during more adverse conditions,” OSFI said in a release. 

The regulator added that it will “continue to monitor the appropriateness” of its stress test parameters and will make adjustments as needed. 

In a separate announcement Friday morning, the finance department matched OSFI’s decision, saying it would maintain the same minimum qualifying rate for insured borrowers who put down less than 20 per cent up front, which is a segment of the market that the government oversees. 

OSFI brought the stress test into place to ensure prudent underwriting practices and to safeguard the economy amid growing concern about high household debt levels as home prices surged to all-time highs in the country’s hottest markets. 

And those concerns have continued unabated, particularly as the pandemic altered work habits and reinvigorated many of the country’s largest housing markets and their bedroom communities. 

A fresh reminder of the housing market heat came on Friday as the Teranet-National Bank home price index rose to an all-time high after rising 0.4 per cent in November. 

Indeed, scrutiny of the country’s real estate landscape extends to the upper ranks of Canada’s biggest banks.

“The time is now. There’s really no time to wait on all of this,” said Canadian Imperial Bank of Commerce President and Chief Executive Victor Dodig in an interview that was taped on Thursday.

Dodig called on all levels of government – municipal, provincial, and federal – to collaborate on a solution amid a general consensus “that continued growth in immigration is going to drive demand for housing.” 

The stress test was last updated this summer, when the current parameters came into force in June. Previously, borrowers had to show they’d be able to keep up on payments at the higher of their contract rate plus two percentage points or the Bank of Canada’s five-year rate, which was steadily at 4.79 per cent.