OTTAWA/TORONTO (Reuters) -Canada’s banking regulator on Friday said lenders will have to limit the number of mortgage borrowers with highly leveraged loans in their portfolios as Canadians grapple with the burden of huge debt in a challenging economic environment.
In an emailed statement, the Office of the Superintendent of Financial Institutions (OSFI) said it is implementing a cap on the number of mortgages a bank can lend that are larger than 4.5 times a borrower’s annual income.
The loan-to-income, or LTI, measure applies to individual banks and is designed to prevent the buildup of highly leveraged loans during low interest rate periods, OSFI said.
The banks will have to monitor and manage their portfolio of underwritten mortgages every quarter, it added.
OSFI said it had considered banks’ business models and that the portfolio limit, specific to each institution, would not bind any…
