Federal Mortgage Stress Test: following the Bank of Canada’s 0.50% interest rate cut (March 16, 2020), as a result of the coronavirus epidemic, the Office of the Superintendent of Financial Institutions (OSFI) decided to suspend the previously announced change. The cut on interest rate have a greater affect than the previously announced benchmark rate. By suspending the stress test changes avoids a compounding effect. The bank’s published rate will remain the benchmark, which is 0.75% with the potential of a further cut.
The OSFI will also lower the Domestic Stability Buffer by 1.25% to 1%, effective immediately. The Domestic Stability Buffer applies only to Domestic Systemically Important Banks (D-SIBS), the six major banks. The lower buffer will allow easier lending and larger lending capacity to the economy to help with the coronavirus epidemic.
For details regarding the changes to insured and uninsured mortgage stress benchmark rate, you may refer to our previous article that covers the topic by clicking HERE.