Office of the Superintendent of Financial Institutions
I am joined by other senior officials who will help me answer your questions today.
In brief, the purpose of the letter we released today is to restart OSFI’s consultation on the minimum qualifying rate for uninsured mortgages with a new proposal and to reinforce the importance of sound mortgage underwriting in Guideline B-20 in light of the current economic environment.
Our proposal is that the qualifying rate for all uninsured mortgages should be the greater of the mortgage contractual rate plus 200 basis points
or 5.25 percent.
The level was set using the average benchmark rate that prevailed in the 12 months leading up to the pandemic.
Additionally, we are proactively reminding institutions and reinforcing our expectations for sound mortgage underwriting practices.
In particular, we are looking for heightened vigilance from lenders on collateral management, income verification and debt servicing.
We will also be monitoring for institutions extending amortization periods and increasing debt service limits.
Looking at the potential for changes in interest rates, housing prices, employment levels and other unforeseen costs, underscores the importance of sound underwriting.
Having a minimum qualifying rate builds some of this uncertainty into our prudential expectations and helps ensure that the financial system is adequately prepared for a variety of post-pandemic economic conditions.
Comments are welcome by May 7, we will announce the results and a summary of comments on May 24, 2021, and decisions will come into force on June 1, 2021.
We have committed to revisit the calibration and appropriateness of the qualifying rate and to publish the results of this review annually in December.
I am happy to take your questions