It’s no secret that Canada’s banking regulator has its sights set on fixed-payment variable-rate mortgage products. And OSFI chief Peter Routledge reiterated that point during a speech today.
Routledge said OSFI’s mortgage stress test, which ensures mortgage borrowers are able to handle higher rates by qualifying them currently at two percentage points above their contract rate, is “effective,” but “not perfect.”
“During the pandemic years, when interest rates fell to historic lows, many mortgagors took out variable-rate, fixed-payment mortgages (VFM),” he said during the Scotiabank Financials Summit.
These mortgage products, which are offered by most big banks except for Scotiabank and National Bank, keep monthly payments fixed even as interest rates fluctuate. When rates rise, as they have over the past year and a half, less…