OSFI Considers Stress Test for Uninsured Mortgages

The Office of the Superintendent of Financial Institutions (OSFI) is proposing a stress test for uninsured mortgages.

That means homebuyers who get an uninsured mortgage—those with a down payment of 20% or more—will have to undergo a test to see if they’d be able to make their payments in the event that mortgage rates go up.

The banking regulator proposed the measure on Thursday as part of draft changes for public consultation.

Currently, only homebuyers who get insured mortgages face a stress test and must qualify at the Bank of Canada’s conventional five-year fixed posted rate (currently 4.64%).

OSFI has also proposed prohibiting co-lending arrangements (also known as bundled mortgages) that “are designed or appear to be designed to circumvent regulatory requirements.”

And the regulator has suggested requiring loan-to-value measurements be adjusted for local market conditions.

OSFI is seeking feedback on the proposals until Aug. 17, 2017. The final guidelines will be issued in the fall and come into effect shortly thereafter.