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    OSFI Proposes New Benchmark Rate for Qualifying Uninsured Mortgages

    February 18, 2020

    OSFI announced that it is considering a new benchmark rate for determining the minimum qualifying rate for uninsured mortgages. OSFI also published the frequently asked questions on the new benchmark rate, along with remarks of Ben Gully, the Assistant Superintendent of Regulation Sector at OSFI, who sets the new benchmark rate for determining the minimum qualifying rate for uninsured mortgages. OSFI is considering replacing the current benchmark rate, which is set by the mortgage underwriting guideline (Guideline B-20), with the weekly median five-year fixed insured mortgage rate from mortgage insurance applications, plus a 2% buffer. OSFI is seeking input on this proposal before March 17, 2020. OSFI will communicate final amendments to the benchmark rate for uninsured mortgages by April 01, 2020, with the changes being proposed to become effective on April 06, 2020.

    OSFI had, on January 24, 2020, indicated that it was reviewing the benchmark rate (or floor) used for qualifying uninsured mortgages. The Department of Finance, in consultation with OSFI and other federal agencies, has also reviewed the benchmark rate in the context of its minimum qualifying rate for insured mortgages. The Minister of Finance announced that the current benchmark rate used in the minimum qualifying rate for insured mortgages will be replaced by the following new benchmark rate, effective April 06, 2020:

    • The weekly median five-year fixed insured mortgage rate as calculated by the Bank of Canada from mortgage insurance applications adjudicated by federally backed mortgage insurers, plus
    • A buffer of 200 basis points to be set by the Minister of Finance on the coming into force

    The Bank of Canada will publish the new benchmark rate every Wednesday, with the rate coming into effect the following Monday. If, on any given week, there are any delays in updating the new benchmark rate, the previous week’s published rate will stand until a new rate is published. OSFI is proposing to adopt this same rate in the calculation of the minimum qualifying rate for uninsured mortgages. The new benchmark rate would replace the five-year conventional rate and would be more representative of the broader market and responsive to fluctuations in actual contract rates. In addition to introducing a more accurate floor, the OSFI proposal maintains cohesion between the benchmark rates used to qualify both uninsured and insured mortgages. To facilitate implementation, OSFI is also proposing that this new benchmark rate be effective from April 06, 2020, to coincide with the changes to the minimum qualifying rate for insured mortgages.


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    Comment Due Date: March 17, 2020

    Effective Date: April 06, 2020 (proposed)

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