The Office of the Superintendent of Financial Institutions (OSFI) announced Feb. 18 that it is considering a new benchmark rate for determining the minimum qualifying rate for uninsured mortgages.
OSFI's mortgage underwriting guideline (B-20) sets the minimum qualifying rate for uninsured mortgages Currently, the minimum qualifying rate is the higher of the contractual mortgage rate plus two percent, or the 5-year benchmark rate published by the Bank of Canada.
OSFI says it has observed that “the gap between actual contract rates and the current benchmark rate has widened, suggesting a less responsive floor than originally intended. The goal of the review is to identify a measure that is more accurate and responsive to market changes.”
OSFI is considering replacing the current benchmark rate with the weekly median 5-year fixed insured mortgage rate from mortgage insurance applications, plus a two percent buffer. This rate is also the new benchmark rate for insured mortgages, announced by the Minister of Finance Bill Morneau on Feb. 18. (OSFI sets the minimum qualifying rate for uninsured mortgages, while the Minister of Finance sets the minimum qualifying rate for insured mortgages.)
OSFI says its proposal “maintains cohesion between the benchmarks used to qualify both uninsured and insured mortgages. It is seeking input from interested stakeholders on this proposal by email to [email protected] before March 17. It plans to communicate final amendments to the benchmark rate for uninsured mortgages by April 1, with changes effective on April 6.
"Continually reviewing our prudential measures is part of an effective regulatory framework. This proposal aims to address the limitations of the current benchmark rate while preserving the integrity of the overall qualifying rate," stated Ben Gully, Assistant Superintendent, Regulation.
