Bank regulator consulting on proposed mortgage guideline changes

OTTAWA –

Canada’s banking regulator has launched consultations on proposed modifications to mortgage pointers to deal with dangers associated to debtors with rising balances.

The Office of the Superintendent of Financial Institutions desires to deal with dangers associated to rising balances, which might occur in circumstances reminiscent of when fastened funds on variable price mortgages aren’t sufficient to cowl the curiosity portion.

The proposal comes after a fast rise in rates of interest from 0.25 per cent early final yr to 4.75 per cent as of final month which have put pressure on debtors and raised considerations over dangers to the mortgage market.

The regulator’s proposal would formalize that mortgages with a rising steadiness and a loan-to-value ratio above 65 per cent don’t meet its expectations associated to B-20 mortgage pointers.

For the mortgage insurer capital adequacy check, it might enable some mortgages to develop to 105 per cent of the unique mortgage earlier than a lender takes remedial motion, up from the present 100 per cent cap.

The launch of consultations, that are set to run till Sept. 1, come a day forward of the Bank of Canada’s newest price determination that forecasters anticipate to see one other quarter of a proportion level rise to 5 per cent.

This report by The Canadian Press was first printed July 11, 2023.