This month the Office of Superintendent of Financial Institutions for Canada is finalizing changes in legislation that will include requiring those that purchase a home with a minimum down payment of at least 20%, not needing mortgage insurance, to prove they could still afford their mortgage payments if interest rates were 200 basis points (two percentage points) higher than the rate they negotiate.
Jeremy Rudin, the Superintendent of Financial Institutions, told reporters. “But we do know this: Housing prices are still near their all-time highs, and mortgage rates are still near their all-time lows. And while sound underwriting is always important, it’s never been more important than it is now.”
Though OSFI, nor the banks have stated that interested rates are headed 2% higher, the fact that they are stress-testing for this to happen, tells me that they are planning for it to happen.
Meanwhile, the Bank of Canada has already announced that they are expecting to increase interest rates again later this month.
Banks have already tightened their lending policies and I’m getting reports of strong applicants having their mortgage applications turned down by the banks.