Loan-to-income limits for uninsured mortgage portfolios
Purpose
High household debt affects credit risk, the safety and soundness of financial institutions, and the overall stability of the financial system. This measure helps to reduce the proportion of highly leveraged loans secured against a residential property.
The LTI limit framework is designed to allow institutions to maintain their same relative competitive positions in the industry. In other words, OSFI’s LTI limit framework is proportionate to the different business models competing for Canadians’ mortgages.
Framework design
The loan-to-income (LTI) limit is applicable to new originations at the portfolio level, not to individual borrowers.
On a quarterly basis, each institution manages the portion of the newly originated loans in their mortgage portfolio that exceed the 4.5x loan to income multiple. This compliance reporting has been in effect since the implementation of the LTI limit at each institution’s 2025 fiscal year start.
The portion of the new mortgage loans allowed to exceed the 4.5 multiple is unique to each institution. Informed in part by consultation feedback, this nuanced and tailormade approach applies at the individual institution level. The measure was designed to reduce leverage in the system while allowing institutions to maintain their same relative competitive positions in the industry.
Scope of loans
To prevent the buildup of loans across multiple institutions, all loans secured against a property are in scope:
- first and second mortgages, HELOCs, and other borrowing vehicles;
- those held by the same or a different institution;
- regardless of the intended use of the property (owner-occupied or investment property for rent);
Excluded are insured loans, reverse mortgages, renewals, and refinances where the only change is a longer amortization.
Qualifying income
Total qualifying income based on the institution’s definition should be applied. This should align with the logic used to calculate debt service ratios.
LTI and the Minimum Qualifying Rate (MQR)
While both LTI and MQR are intended to reduce mortgage lending risks, the LTI limits are expected to contain overall residential mortgage credit risk to institutions. OSFI will consider the efficacy of, and continued need for, the MQR for uninsured mortgages following implementation of the new LTI limit framework.