TORONTO — Canada’s financial regulator hit back at criticisms of its stress test for uninsured mortgages, which has made it harder for borrowers to qualify and weighed on national home sales.
But a senior official at the Office of the Superintendent of Financial Institutions’ told a Toronto event that the regulator continues to monitor the environment and when changes are warranted, it will make them.
Assistant superintendent Carolyn Rogers says while interest rates have gone up since it introduced the stress test in January 2018, a buffer is still prudent as rates remain historically low while personal debt levels remain high.
Rogers also addressed concerns that the stress test for federally regulated lenders which requires a borrower to prove they can keep up with their payments if interest rates rise has reduced competition, as borrowers can avoid it if they renew their mortgage with their existing bank.
She told the Economic Club of Canada that the regulator has put in place a tracking system to monitor this risk and to date hasn’t seen any evidence that banks are taking advantage of this situation.
National home sales fell by 2.5 per cent in December from the previous month to cap off the weakest annual sales since 2012 as the stress test and rising interest rates weighed on activity.
The Canadian Press