Canada's banking regulator says it will be putting limits on how much leverage banks allow in their uninsured mortgage portfolios. Bank towers are shown from Bay Street in Toronto's financial district, on Wednesday, June 16, 2010. THE CANADIAN PRESS/Adrien Veczan
OTTAWA – Canada’s banking regulator says it will be putting limits on how much leverage banks allow in their uninsured mortgage portfolios.
The Office of the Superintendent of Financial Institutions says the loan-to-income limit on new uninsured mortgages will help reduce the risk of borrowers being unable to pay their loans.
Because the limit will apply on a portfolio level, individual borrowers won’t face a specific limit.
OSFI says for banks, the common limit on portfolios will be that new loans can’t exceed 4.5 times a borrower’s income, but the portion of new loans that can exceed the limit will be tailored to each bank.
The regulator says the measure will act as a backstop to the minimum qualifying rate, also known as the mortgage stress test, which can still allow for higher leverage at times of low interest rates.
OSFI says the limit is expected to take effect at each financial institution’s fiscal first quarter of 2025.
This report by The Canadian Press was first published April 12, 2024.
