Posted by AbsoluteMortgage.ca on April 9, 2021
Canada's financial regulator on Thursday proposed a change to a four-year-old financial stress test that would alter the benchmark used to set the minimum qualifying rate, restarting a consultation that it shelved over a year ago.
The Office of the Superintendent of Financial Institutions proposed a fixed rate of 5.25%, replacing the originally planned benchmark of the weekly median five-year fixed insured rate calculated from mortgage insurance applications, which stakeholders said would be "highly volatile," it said in a letter sent to lenders seeking their feedback.
The benchmark will be either the greater of a range of rates submitted by lenders plus 200 basis points - the rate already in use - or 5.25%, according to the letter.
The change would drop the use of banks' advertised rates that tend to be higher than actual market rates to determine the minimum qualifying rate.