Stress tests for Vancouver, Toronto home prices
Canada’s banking regulator is requiring banks to conduct stress tests to determine how they would deal with a 50 per cent downturn in Vancouver real estate prices and a 40 per cent cut in Toronto home prices. The key changes announced Tuesday by the Office of the Superintendent of Financial Institutions Canada come on the heels of a letter it sent earlier this month to all federally-regulated financial institutions reminding them to exercise prudence when underwriting home mortgages. The regulator identified several areas that it said it will be watching closely, including the verification of a borrower’s income, debt service ratios and the reliability of property appraisals. Last month, the Bank of Canada raised concerns about the housing market.