Canada’s housing market may be cooling, but regulators say the financial system is holding strong. Speaking earlier this week, Peter Routledge, Superintendent of the Office of the Superintendent of Financial Institutions (OSFI), highlighted that stringent underwriting standards continue to act as a buffer against rising risks. Despite falling home prices and slower demand, mortgage delinquencies remain close to historic lows, offering reassurance to lenders, policymakers, and homeowners alike.

Context: The Role of OSFI and the B-20 Rule

Back in 2012, OSFI introduced the B-20 mortgage stress test, requiring borrowers to qualify at higher interest rates than their contract terms. This move was controversial at the time, as many felt it locked first-time buyers out of the market. Yet today, it’s being credited with insulating Canada’s financial system against excessive defaults.

By forcing households to prove they could handle higher payments, the stress test limited risky lending practices. Now, with interest rates having surged since 2022, Canada’s mortgage market looks comparatively stable when stacked against countries where lending standards were looser.

Market Snapshot: Housing Cooldown in 2025

Home prices: National benchmark prices are down roughly 10–15% from their early-2022 peak, with bigger declines in overheated markets like Toronto.
Mortgage arrears: Delinquencies remain near record lows, hovering around 0.15% nationally—a sign that households are still making payments despite higher borrowing costs.
New lending: Mortgage growth has slowed, with more borrowers opting for shorter-term fixed products as they wait out volatility.

This mix of falling prices, lower demand, and stable arrears suggests the market is undergoing a controlled correction rather than a freefall.

Expert Voices

According to Routledge, “Strong underwriting standards mean Canada’s housing system has layers of protection that continue to hold up even in this environment of higher rates and slower growth.”

Analysts from Mortgage News Canada agree, noting that financial institutions have not had to significantly raise provisions for credit losses—another sign of system resilience.

Why It Matters

The importance of stable lending standards goes beyond regulators:

For homeowners: It means fewer forced sales or foreclosures, reducing the risk of further downward pressure on prices.
For banks: It ensures mortgage portfolios remain healthy, keeping lending capacity open for future buyers.
For new borrowers: It provides some reassurance that, while affordability remains stretched, systemic risks of collapse are low.

In short, Canada’s housing slowdown is painful for affordability, but not catastrophic for financial stability.

Canada’s mortgage market is navigating turbulence with resilience. Strong rules like OSFI’s B-20 stress test continue to cushion the impact of rising rates and falling prices, ensuring that the country avoids the kind of credit crunch seen elsewhere.

For buyers and homeowners, this means the focus shifts from systemic risk to personal affordability. With renewals approaching and borrowing costs still elevated, households should be proactive in exploring refinancing strategies, payment planning, and professional mortgage advice.

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