Canada’s Banking Regulator Mulling Further Tightening of Mortgage Rules
A spokesman for the Office of the Superintendent of Financial Institutions told industry newsletter Canadian Mortgage Trends that it’s considering new rules that would limit banks from issuing any mortgages at all with amortizations of more than 25 years.
Lenders currently offer mortgages as long as 35 years where the borrower has a strong credit rating and a substantial down-payment.
OSFI told Canadian Mortgage Trends that it’s “doing some preliminary consultation with financial institutions” on the issue.
The regulator added it is “working to determine the desirability of some changes given current conditions in housing markets and recent trends in household indebtedness.”
“A decision in that regard would be taken once we hear back from the industry. Any proposed changes to our mortgage guideline that may result from this work would be subject to a public consultation process.”
With the housing market continuing to slow, there is growing pressure on both banks and OSFI to ensure that underwriting standards are solid and that lenders don’t get saddled with major losses in the event real estate goes into a serious downturn.
Since the financial crisis that began in 2008, OSFI and the Department of Finance have taken steps several times to tighten mortgage rules, so far primarily in a bid to prevent what many see as a housing bubble.
The most recent change came last July when Finance Minister Jim Flaherty capped amortizations on mortgages insured by the Canada Mortgage and Housing Corporation at 25 years. Previously, the limit was 30 years.
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