OTTAWA –
Canada’s banking regulator is expected to make an announcement regarding the interest rate used in a key stress test for uninsured mortgages this morning.
As inflation remains hot, the cost of borrowing has skyrocketed for Canadians.
The Bank of Canada has hiked its key interest rate seven consecutive times since March, bringing it to 4.25 per cent — the highest rate since January 2008.
Before the central bank’s aggressive rate hike cycle, the Office of the Superintendent of Financial Institutions (OSFI) said on Dec. 17, 2021 that the minimum qualifying rate for uninsured mortgages would remain the greater of the mortgage contract rate plus two percentage points or 5.25 per cent.
At the time, OSFI said in an environment characterized by increased household debt and low interest rates, it is essential that lenders test borrowers to ensure that they can pay their debts under more adverse conditions.
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.
