Federal banking regulator keeps key mortgage stress test rate unchanged

OTTAWA –

Canada’s banking regulator is holding the interest rate used in a key stress test for uninsured mortgages steady.

The Office of the Superintendent of Financial Institutions says the minimum qualifying rate for uninsured mortgages will remain the greater of the mortgage contract rate plus two percentage points or 5.25 per cent.

Uninsured mortgages are residential mortgages with a down payment of 20 per cent or more.

OSFI says it makes decisions on the minimum qualifying rate based on data from its ongoing monitoring of federally regulated financial institutions, as well as a range of vulnerability indicators which include Canadian housing market and broader macroeconomic data.

Mortgage rates have been rising this year as the Bank of Canada has raised its key interest rate target seven times in an effort to bring inflation under control.

Last week, OSFI superintendent Peter Routledge responded to calls to lower or eliminate the minimum qualifying rate, saying the regulator sees great risk in speculating on the mortgage rate cycle and does not consider the stress test to be a tool to manage the demand for housing.

This report by The Canadian Press was first published Dec. 15, 2022

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