According to the Canadian Mortgage Brokers Association BC, the Office of the Superintendent of Financial Institutions (OSFI) restarted its consultation on the minimum qualifying rate for uninsured mortgages and re-emphasized the importance of sound mortgage underwriting.
The new proposal for the qualifying rate for uninsured mortgages is the higher of the mortgage contract rate plus 2% or 5.25% as the minimum qualifying rate. OSFI also announced that they are going to re-evaluate this policy at least once yearly and update it as necessary depending on market risks.
Canada’s financial system strength allows Canadians to thrive in a tough economic environment. Without a strong base, Canada will not be able to recover from its post-pandemic economic position and OSFI has taken this into consideration by taking proactive action now so banks can remain resilient during difficult times. The minimum qualifying rate adds a margin of safety that guarantees borrowers will have the ability to make mortgage payments in case of an emergency. Mortgage loans are one of the largest exposures the major financial institutions carry, so by ensuring borrowers can repay their debts if need be, banks continue to stay safe and sound for Canadians.
OSFI intends to communicate any amendments to the qualifying rate for uninsured mortgages in by May 24, 2021, with potential changes coming into effect June 1, 2021.
See news and updates around Guideline B-20 here for more details.