As Canada’s banking regulator prepares to release its quarterly update on Thursday, mortgage industry watchers are increasingly focused on whether OSFI will offer any new guidance on the future of the mortgage stress test.
In a recent note, Edge Realty Analytics’ Ben Rabidoux said he believes the odds now favour at least some form of direction from OSFI, following a year-long pilot of loan-to-income (LTI) limits at federally regulated lenders, including the country’s largest banks..
The limits cap how many new uninsured mortgages banks can issue to borrowers taking on debt of more than 4.5 times their annual income, applying the rule across lenders’ portfolios rather than to individual loans.
“I think it’s slightly better than a coin toss that we see OSFI announce the end of the stress test this week, with implementation perhaps by mid-year,” Rabidoux wrote. “If they do, it would go a long way toward thawing the current resale market and getting first-time buyers to reengage.”
Industry veteran Ron Butler agrees that changes are increasingly likely, even if they come in stages rather than all at once.
“Some modification or even partial cancellation of the stress test is in the cards,” Butler told Canadian Mortgage Trends. “OSFI wouldn’t have run a year-long LTI test using all Big Banks if it didn’t expect a change to happen eventually.”
Butler pointed to the United Kingdom as a useful reference point, where regulators were early adopters of mortgage stress testing before eventually shifting to loan-to-income limits as the primary macroprudential tool.
“The key thing to understand is that Britain was an early stress-test adopter but eventually replaced it with LTI,” he added. “I expect phased-in announcements shortly.”
Why attention is turning to this week’s update
OSFI’s quarterly update is closely watched for signals on how the regulator is assessing risk and where policy discussions may be heading.
In recent months, OSFI officials have offered additional context on that thinking in public remarks, including commentary on mortgage risk and borrower leverage.
Speaking at a Morningstar DBRS fireside chat last October, Superintendent Peter Routledge said the regulator has so far “liked what we are seeing” from the LTI pilot, adding that an income-based approach “might have helped avoid some of the issues that were part of the COVID-era housing boom.”
Data from the Bank of Canada shows that during the pandemic surge, more than a quarter of new mortgages were issued with loan-to-income ratios above 450%. That share has since dropped into the low double digits as interest rates rose and lending conditions tightened.
Rabidoux says the change helps explain why income-based limits may work better than a fixed stress test as interest rates rise and fall.
“The LTI framework would act as a limiter on debt buildup in low-rate environments without unduly constraining lending in a normalized rates world like we see today,” he wrote
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Last modified: January 27, 2026