Canada’s top banking regulator is proposing to raise the mortgage stress test level to 5.25 per cent or two percentage points above the market rate, whichever is higher.
That’s a hike from 4.79 per cent, which is the current average posted rate at Canada’s biggest lenders.
Thursday’s change by the Office of the Superintendent of Financial Institutions (OSFI) means borrowers will need to prove that their finances can pay for the loan at that higher rate, regardless of what a lender is willing to lend them. This would make it harder to qualify for a home loan, shrinking the pool of qualified borrowers and ultimately bringing down some of the upward pressure on house prices in the country.
The regulator says it is seeking submissions from stakeholders about its proposal until May 7th, before the new rules would be put into place for uninsured loans as of June 1.