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Canada’s Superintendent of Financial Institutions has responded to calls for lower requirements on mortgage applicants, saying that lenders need to keep the “stress test” to ensure applicants will be able to pay their mortgages come what may, and to protect the nation’s financial system from risky loans.
“Some have understandably argued that [we] should lower or eliminate the [stress test],” said Peter Routledge, superintendent of financial institutions, in a statement Dec. 9. “They suggest that mortgage rates may be peaking and that the [stress test] puts an undue burden on homebuyers.”
Routledge said he sees the stress test as “an underwriting practice that adds an important safety buffer to residential mortgage portfolios, the largest exposure Canadian lenders have on their books.” It is one of the measures implemented since the Global Financial Crisis of 2008–2009, he said, to add safety buffers and resilience to Canada’s financial system....