Opening remarks by Tolga Yalkin for the Minimum Qualifying Rate setting announcement

Our focus at OSFI, in relation to real estate secured lending, is to ensure sound mortgage underwriting by federally regulated lenders. This enhances the quality of their loans, minimizing their risk, helping to protect deposit-holders and creditors while also contributing overall to the resilience of Canada’s financial system.

Throughout the recent period of historically low interest rates, lenders qualified their borrowers at a minimum rate of 5.25%, despite the fact that the contract rates of these mortgages were often below 2.0%. This margin of safety made it easier for Canadian homeowners to continue to pay their mortgages and stay in their homes when rates started rising. The MQR is one reason why residential mortgage defaults remain at or near historic lows.

Today, we are confirming that the current rate for uninsured mortgages remains unchanged at the greater of the mortgage contract rate plus 2 percent or 5.25 percent. In an environment characterized by sustained high inflation, rising mortgage interest rates, and potential risks to borrower income, it is prudent that lenders continue to test borrowers for adverse conditions.

In the spirit of continuing to examine and strengthen mortgage underwriting standards, in January, OSFI will be launching a consultation on Guideline B-20. This guideline provides the basis for the MQR, along with other critical elements of sound residential mortgage underwriting.

Feedback from this consultation will inform revisions to Guideline B-20. The revised guideline itself will be issued for public consultation at a future date.

I will now repeat these remarks in French and after that we will open the lines for questions.

Thank you.