OSFI to take new measures to address equity-based mortgage loans
The Office of the Superintendent of Financial Institutions telegraphed the move in an update released Monday on the effectiveness of new underwriting rules it announced last year. Those rules included a new “stress test” for uninsured mortgages, where a borrower makes a down payment of 20 per cent or more.
According to OSFI’s October newsletter, the tweaks were needed after the regulator identified possible trouble spots caused by high levels of household debt and “imbalances” in some real estate markets that could have added more risk for banks.
There have been improvements in the quality of new mortgage loans since the revised B-20 guidelines came into effect this past January, OSFI says, “including higher average credit scores and lower average loan-to-value at mortgage origination.”
But even though OSFI said the new rules “are having the desired effect of helping to keep Canada’s financial system strong and resilient,” the regulator claims more work is needed.