By Nichola Saminather
TORONTO, April 8 (Reuters) - Canada's financial regulator on Thursday proposed a change to its four-year-old mortgage stress test, making it more stringent from its original plan following concerns that the initial measures could further stimulate the red-hot housing market.
The Office of the Superintendent of Financial Institutions (OSFI) is proposing that the new benchmark to determine the minimum qualifying rate for uninsured borrowers would be either the greater of a range of rates submitted by lenders plus 200 basis points or 5.25%, according to a letter to lenders.
It is broadly an increase from the initial plan announced in February 2020, which was shelved a month later as the coronavirus pandemic took front seat. That proposed the weekly median five-year fixed insured rate, calculated from mortgage insurance applications, as the benchmark, which stakeholders said would be “highly volatile.“
The new measures are expected to come into force on June 1, with the fixed 5.25% rate replacing a benchmark made up of banks' advertised rates - currently 4.79% - which tend to be higher than actual market rates, to determine the minimum qualifying rate.