OSFI Proposes New Benchmark Rate for Qualifying Uninsured Mortgages
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.
Related Links
Comment Due Date: March 17, 2020
Effective Date: April 06, 2020 (proposed)
Previous Article
OFR Publishes Tool for Monitoring Systemic Risk of BanksRelated Articles
ESAs Issue Multiple Regulatory Updates for Financial Sector Entities
The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.
FSB and NGFS Publish Initial Findings from Climate Scenario Analyses
The Financial Stability Board (FSB) and the Network for Greening the Financial System (NGFS) published a joint report that outlines the initial findings from climate scenario analyses undertaken by financial authorities to assess climate-related financial risks.
FSB Issues Reports on NBFI and Liquidity in Government Bonds
The Financial Stability Board (FSB) published a letter intended for the G20 leaders, highlighting the work that it will undertake under the Indian G20 Presidency in 2023 to strengthen resilience of the financial system.
ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments
The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.
IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets
The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.
EBA Finalizes Methodology for Stress Tests, Issues Other Updates
The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups
EU Finalizes Rules Under Crowdfunding Service Providers Regulation
The European Union has finalized and published, in the Official Journal of the European Union, a set of 13 Delegated and Implementing Regulations applicable to the European crowdfunding service providers.
OSFI Sets Out Work Priorities and Reporting Updates for Banks
The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.
APRA Finalizes Changes to Capital Framework, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.
BIS Hub and Central Banks Conduct CBDC and DeFI Pilots
The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.
