OSFI makes changes to home loans to reduce lender risk


OTTAWA — Canada’s banking regulator is tightening requirements for certain types of home loans to protect homeowners who may be more at risk in the event of higher interest rates.

The Office of the Superintendent of Financial Institutions says the changes affect blended loan plans like reverse mortgages or equity loans, which have grown in popularity in recent years but can be riskier for lenders.

For borrowers who owe more than 65% of the loan value, a portion of their payment must be allocated to loan principal rather than interest until they bring the loan below that threshold.

OSFI says the changes will generally take effect the next time borrowers renew their plans after late fall 2023, in accordance with the lender’s fiscal year.

The regulator says consumers won’t see an increase in their monthly payment requirements as a result of this change, and the move won’t impact new homebuyers.

Data from the Bank of Canada shows that combined loan plans above 65% of the loan-to-value ratio account for $204 billion of the $1.8 trillion in outstanding residential mortgages in the country.

This report from The Canadian Press was first published on June 28, 2022.

The Canadian Press

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