OSFI is 'very worried' about Canadians' finances: Routledge

The head of Canada’s banking regulator said he’s worried about how higher borrowing rates will affect Canadian households, and also relieved that the country’s mortgage stress test was strengthened one year ago.

“If you're asking, ‘Are you worried as rates continue to rise, that will put stress on Canadian households,’ yeah, we're very worried about that. And we're constantly looking at what we can do to add a bit more resilience into the system,” said Peter Routledge, the head of the Office of the Superintendent of Financial Institutions (OSFI), in an interview Tuesday.

It was effective June 1, 2021 that OSFI raised the bar for its minimum qualifying rate for uninsured borrowers (ie, those who make a down payment of at least 20 per cent), requiring them to prove they could handle mortgage payments of either 5.25 per cent or their contract rate plus two percentage points – whichever was higher. The regulator also built in a yearly review of the test as part of the framework.

It’s a move that Routledge said is now paying off.