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OSFI maintains Minimum Qualifying Rate for uninsured mortgages
Office of the Superintendent of Financial Institutions – Dec 2023
Today, the Office of the Superintendent of Financial Institutions (OSFI) announced that the minimum qualifying rate for uninsured residential mortgages (MQR) will remain the greater of 5.25 per cent or the mortgage contract rate plus 2 per cent.
Uninsured residential mortgages are homeowner mortgages that typically include a down payment of 20 per cent or more. OSFI makes decisions on the MQR for uninsured mortgages based on data from its continuing monitoring of federally regulated financial institutions, as well as a range of vulnerability indicators which include Canadian housing market and broader macroeconomic data. OSFI also consults its federal financial regulatory partners, notably the Department of Finance Canada and the Bank of Canada, when setting the MQR.
OSFI is confident that the MQR under its current formulation will lead to lower residential mortgage delinquency and default rates than would otherwise be the case if lenders did not apply the MQR when originating mortgages for homeowners.
The MQR increases the likelihood that homeowners will still be able to pay their mortgages, even when events like an increase in interest rates or unexpected loss of income occur. OSFI expects that lenders will apply the MQR to ensure that borrowers can handle a higher interest rate than what they initially contracted to pay. This puts in place a safety buffer that benefits both the borrower and the lender.
Canadian lenders have a big stake in residential mortgages. Making sure borrowers can repay their loans even in the face economic difficulties is crucial for keeping Canada’s financial system resilient.
“The minimum qualifying rate for uninsured mortgages has produced a more resilient residential mortgage financing system characterized by low default and delinquency rates. Holding the MQR at its current rate helps ensure that lenders and borrowers effectively manage the risks associated with residential mortgages. This discipline contributes to the resilience of Canada’s financial system.”
– Peter Routledge, Superintendent of Financial Institutions