OSFI considers changing mortgage regulations in Canada

The Office of the Superintendent of Financial Institutions (OSFI) is considering a change to the mortgage stress test in Canada. They aim to move from a focus on individual borrowers to a more bank-level approach. This change would limit the amount of high loan-to-income mortgages that banks can issue to 15% of their quarterly originations. Currently, the stress test requires borrowers to qualify at either a rate of 5.25% or their contract rate plus 2%. However, OSFI found that this approach has not been effective in controlling the growth of high loan-to-income mortgages. As of January 31, 2025, a new cap restricts banks from granting more than 15% of mortgages to heavily indebted borrowers. There are issues in the pre-construction condo market as well. Properties are being appraised at 10-30% less than their original purchase prices. This situation highlights the need for better regulatory oversight. Certain industries, like steel and aluminum, are facing tighter lending rules, raising concerns about the overall economy and mortgage accessibility.