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Canada restarts consultation on change to mortgage stress test benchmark

Published 04/08/2021, 02:48 PM
Updated 04/08/2021, 02:50 PM

TORONTO (Reuters) - Canada's financial regulator on Thursday proposed a change to a four-year-old financial stress test that would alter the benchmark used to set the minimum qualifying rate, restarting a consultation that it shelved over a year ago.

The Office of the Superintendent of Financial Institutions proposed a fixed rate of 5.25%, replacing the originally planned benchmark of the weekly median five-year fixed insured rate calculated from mortgage insurance applications, which stakeholders said would be "highly volatile," it said in a letter sent to lenders seeking their feedback.

The benchmark will be either the greater of a range of rates submitted by lenders plus 200 basis points - the rate already in use - or 5.25%, according to the letter.

The change would drop the use of banks' advertised rates that tend to be higher than actual market rates to determine the minimum qualifying rate.

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