Office of the Superintendent of Financial Institutions says it will not heed calls to loosen mortgage standards as interest rates rise
“The uncertainty and anxiety caused by a rising interest rate environment have, understandably, caused some Canadians to advocate for a loosening of the underwriting standards in Guideline B-20,” Peter Routledge acknowledged in prepared remarks for a speech in Toronto.Sign up to receive daily headline news from the Calgary Herald, a division of Postmedia Network Inc.By clicking on the sign up button you consent to receive the above newsletter from Postmedia Network Inc.
“We tightened our expectations so that lenders will have to ensure their residential, uninsured mortgage clients with loan-to-value amounts above 65 per cent do not repeatedly borrow against their principal or the price appreciation on their homes, which would sustain their indebtedness,” he said. In a wide-ranging speech, he warned that tactics and strategies used in the past may not be effective in combatting increasingly volatile economic and financial conditions, and signalled a more interventionist approach.“When evaluating supervisory or regulatory strategies, OSFI must accept the risks of acting early to minimize the costs of acting too late.”
All banks should be maintaining capital and liquidity buffers “well above” their through-the-cycle averages, Routledge said. OSFI has also pledged to develop digital asset regulation and supervision “based on the principle of same activity, same risk, same regulation.” “Their job is to protect the underlying franchises so that they have the resources to withstand more dangerous times and then prosper through periods of growth,” he said.
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