OSFI looking at whether low-risk, uninsured mortgages also need tightening

OTTAWA – Canadian Mortgage says it has been notified that the national banking regulator is looking at a possible further tightening of mortgage rules — this time for those with low risk mortgages that don’t require government-backed insurance.

The industry newsletter posted an item on its webpage Monday that the Office of the Superintendent of Financial Institutions verified it is looking at whether amortization periods should be limited to 25 years on mortgages with 20 per cent or more equity, that don’t require to be insured.

The current amortization period limit for such conventional mortgages is 35 years. In July, Finance Minister Jim Flaherty dropped the period to 25 years on mortgages with less than 20 per cent downpayment.

OSFI has said it would not make any changes until it has consulted with the industry.

“A decision in that regard would be taken once we hear back from the industry. Any proposed changes to our mortgage guideline that may result from this work would be subject to a public consultation process,” the regulator is quoted as saying.

In a recent speech earlier this month, OSFI head Julie Dickson said Canadian uninsured mortgages tend to be of higher quality than in many other countries but still warranted attention.

“The real estate lending market has been a big area of focus for OSFI, because of the significant incentives for consumers to borrow and for banks to maintain revenues, the size of mortgage lending portfolios, the concerns about some markets being overvalued, and the possibility that customers’ debt serviceability could be masked by low interest rates,” she said.

Home sales in Canada are down about 15 per cent since Flaherty last tightened rules for higher-risk mortgages, but prices remain elevated.

In her speech, Dickson said it was still too early to determine whether the recent policy moves have taken all the froth out of the housing market.

Note to readers: This is a corrected story. An earlier version published May 13 contained an incorrect name for Canadian Mortgage