The End of Canada’s Mortgage Stress Test?
OSFI’s New Game-Changing Proposal
Canada’s housing market, the Office of the Superintendent of Financial Institutions (OSFI) is considering replacing the controversial mortgage stress test with a new portfolio-level approach to risk management.
The stress test appears to have achieved its initial objective of protecting Canada’s financial system during the period of low interest rates, the current economic landscape presents new challenge.
The new approach would limit banks’ overall exposure to high-risk lending. Specifically, banks would be restricted to issuing no more than 15 per cent of their quarterly mortgages to borrowers whose mortgage debt exceeds 450 per cent of their annual income.
The regulator must balance the need for market stability with the goal of maintaining a healthy, accessible housing market.
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