TORONTO (Reuters) – Canada’s financial regulator on Thursday proposed a change to a four-year-old financial stress test that would alter the benchmark used to set the minimum qualifying rate, restarting a consultation that it shelved over a year ago.
The Office of the Superintendent of Financial Institutions proposed a fixed rate of 5.25%, replacing the originally planned benchmark of the weekly median five-year fixed insured rate calculated from mortgage insurance applications, which stakeholders said would be “highly volatile,” it said in a letter sent to lenders seeking their feedback.
The benchmark will be either the greater of a range of rates submitted by lenders plus 200 basis points – the rate already in use – or 5.25%, according to the letter.
The change would drop the use of banks’ advertised rates that tend to be higher than actual market rates to determine the minimum qualifying rate.
Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.