Central bank worried that soaring demand for homes coupled with limited supply could lead to speculation and cause economic strain
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The Bank of Canada is throwing official support behind new rules from the country’s bank regulator to cool a red-hot housing market spurred by unique conditions borne out of the pandemic.
If the past is any indication, the soaring demand for homes across the country coupled with limited supply could lead to speculative, extrapolative behaviour and cause economic strain, the central bank warned in its quarterly monetary policy report released Wednesday.
“Recent proposed revisions to the Guideline B-20 by the Office of the Superintendent of Financial Institutions (OSFI) are welcome steps to help reduce these risks,” the bank stated in the report. Guideline B-20 is managed by OSFI, the federal agency that regulates the banks, and lays out the underwriting rules banks must adhere to.
Most importantly, the guideline implements the mortgage stress test, which OSFI early this month proposed to strengthen for uninsured mortgages. Beginning in June, the qualifying rate for uninsured mortgages will be either two percentage points above market rate or 5.25 per cent — whichever is higher. The current qualifying rate is 4.79 per cent.
