Canada’s banking regulator is leaving the door open to tweak its mortgage stress test before the end of this year, as the cost of borrowing soars and the housing market starts to cool across the country.
Since OSFI toughened the mortgage stress test last June, the country’s housing market and borrowing conditions have changed significantly. The regulator must grapple with whether its rules are still effective in the current environment. Today, the average five-year fixed-rate mortgage has an interest rate of 4.19 per cent, according to mortgage brokers. That is up from January’s average of about 2.69 per cent. That means that a borrower must now prove they can make their mortgage payments with an interest rate of 6.19 per cent if they want a fixed-rate mortgage, which is already above the 5.25-per-cent stress-test floor. And the stress test will become even harder as mortgage rates continue to climb.
Borrowers are also turning to alternative lenders such as trusts and private mortgage-investment companies, which do not have to comply with federal banking rules.
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