New mortgage rules in place, including stress test for uninsured borrowers

The Office of the Superintendent of Financial Institutions (OSFI) released new guidelines for the mortgage industry on Oct 17. The regulator floated a similar version of these rules earlier this summer in draft form, but Tuesday’s release makes them official as of Jan. 1.

The final version of its new mortgage rules include a requirement to “stress test” borrowers with uninsured loans to ensure they could withstand higher interest rates.

Under  OSFI’s new rules, borrowers would be stress tested at either the five-year average posted rate, or two per cent higher than their actual mortgage rate — whichever one is higher.

In addition to the stress test, the new rules would require lenders to have more scrutiny around the loan-to-value ratio of the loans they give out, to ensure they are not giving out mortgages that are too large compared to the underlying value of the home.Previously only those with less than 20% down were tested, but now all borrowers will be