In a virtual speech, Superintendent Peter Routledge set out the Office of the Superintendent of Financial Institutions’ assessment of Canadian mortgage credit risk and the direction of mortgage regulation as large volumes of loans reset in 2025 and 2026. Delinquencies have been lower than expected, with 99.8% of Canadians keeping up with their mortgages, but renewal-related payment increases remain a focus, particularly for variable-rate mortgages with fixed payments. As of September 2024, 65% or 3.8 million mortgages are set to renew by the end of 2026, and around 62% or 2.4 million have yet to experience increased payments. Routledge argued that the Minimum Qualifying Rate stress test did not prevent a 2021 to 2022 increase in high loan-to-income originations, defining high loan-to-income as 450% and above, and pointed to OSFI’s use of a loan-to-income test that caps the share of such mortgages a bank can underwrite each quarter. He also noted that OSFI has recently removed the expectation that institutions apply the prescribed Minimum Qualifying Rate on uninsured straight switches between federally regulated financial institutions at renewal, citing low switch volumes and the loan-to-income test as reasons for expecting minimal prudential impact. The remarks also covered capital and non-financial risks. Routledge outlined that the Domestic Stability Buffer could be lowered if systemic vulnerabilities decline sufficiently or in response to a sudden and severe event, with the size of any decrease linked to the likelihood and severity of losses that could otherwise force banks to reduce lending. On Basel III 2017 reforms, OSFI reiterated its commitment to full implementation and linked its one-year delay in raising the standardized capital floor level to uncertainty about peer-jurisdiction implementation timelines, alongside continued dialogue with internal model-based and standardized banks. He also described a growing supervisory focus on integrity and security, including closer coordination with the Financial Transactions and Reports Analysis Centre of Canada on anti-money laundering through enhanced information-sharing, use of cyber resilience resources alongside Guideline B-13, and expectations under OSFI’s Integrity and Security Guideline to address foreign interference supported by its National Security Sector.
Office of the Superintendent of Financial Institutions 2025-01-07
Office of the Superintendent of Financial Institutions signals shift toward loan-to-income limits as 3.8 million mortgages renew by end-2026
In a virtual speech, Superintendent Peter Routledge of the Office of the Superintendent of Financial Institutions discussed Canadian mortgage credit risk and regulatory direction as many loans reset in 2025 and 2026. He noted that while delinquencies are low, renewal-related payment increases, especially for variable-rate mortgages, remain a concern. Routledge also addressed capital and non-financial risks, including potential adjustments to the Domestic Stability Buffer and a focus on integrity and security with the Financial Transactions and Reports Analysis Centre of Canada.