Report
Carl De Souza ...
  • Michael Driscoll

OSFI Prudently Maintains the Minimum Qualifying Rate Safety Buffer for Uninsured Mortgages

On December 15, 2022, the Office of the Superintendent of Financial Institutions (OSFI) announced that it is maintaining the current Minimum Qualifying Rate (MQR) for uninsured residential mortgages. The MQR is an important measure that OSFI utilizes in ensuring that federally regulated financial institutions (FRFIs) amass safety buffers to improve the resiliency of the financial system.

Key highlights include the following:

-- Following its December annual review, OSFI maintained the MQR on uninsured mortgages at the higher of the contract rate plus 2.0% or 5.25%.

-- At current interest rates, FRFIs are being required to stress test borrowers using the contract rate plus 2.0% because it will be above the 5.25% floor. This effectively reduces the mortgage amount a borrower can obtain.

-- DBRS Morningstar views OSFI's MQR announcement positively since the mortgage stress test has effectively added a margin of safety that improved borrowers' ability to absorb interest rate increases.

“While the current MQR requirement puts a heavier burden on homebuyers, DBRS Morningstar views OSFI's decision on the MQR positively because a reduction in, or the elimination of, this critical safety buffer would increase risk in the financial system during a period of heightened macroeconomic uncertainty, including a potential recession,” said Carl De Souza, Senior Vice President, North American FIG.
Underlyings
BANK NOVA SCOTIA Pfd.

BANK OF MONTREAL

BANK OF MONTREAL

BANK OF MONTREAL

BANK OF MONTREAL

BANK OF MONTREAL

BANK OF MONTREAL

BANK OF MONTREAL

Bank of Montreal

Bank of Montreal is a financial services organization. Co. provides a range of retail banking, wealth management and investment banking products and services. Co. serves its clients through three operating groups: Personal and Commercial Banking, which provides financial services to personal and commercial customers; Private Client Group, which provides wealth management products and services to individuals and select institutional segments; and BMO Capital Markets, which provides clients financial and capital markets services to corporate, institutional and government clients.

Bank of Montreal Cl B Series 10 Pfd.

Bank of Montreal Cl B Series 25 Pfd.

Bank of Montreal Pfd.

BANK OF MONTREAL Pfd.

BANK OF MONTREAL Pfd.

BANK OF MONTREAL PR B Pfd.

Bank of Montreal Series 44 Class B

BANK OF MONTREAL- PFD

BANK OF NOVA SCOTIA

BANK OF NOVA SCOTIA

Bank of Nova Scotia

Scotiabank is a financial services provider in North America, Latin America, the Caribbean and Central America, and parts of Asia. Through its three operating segments: Canadian Banking, International Banking, and Global Banking and Markets, Co. provides a range of advice, products and services, including personal and commercial banking, wealth management and private banking, corporate and investment banking, and capital markets. As of Oct 31 2017, Co. had total assets of C$915,273 million and total deposits of C$625,367 million.

Bank of Nova Scotia 5-Year Pfd. Series 30

Bank of Nova Scotia 5-Year Pfd. Series 32

Bank of Nova Scotia Pfd.

BANK OF NOVA SCOTIA PR G Pfd.

BANK OF NOVA SCOTIA PRD Pfd.

CANADIAN IMPERIAL BANK OF COMMERCE

CANADIAN IMPERIAL BANK OF COMMERCE

CANADIAN IMPERIAL BANK OF COMMERCE

CANADIAN IMPERIAL BANK OF COMMERCE

CANADIAN IMPERIAL BANK OF COMMERCE

CANADIAN IMPERIAL BANK OF COMMERCE

Canadian Imperial Bank of Commerce

Canadian Imperial Bank of Commerce is a financial institution. Through its three business units, Co. provides a range of financial products and services to individual, small business, commercial, corporate and institutional clients in Canada and around the world. Co.'s Retail and Business Banking business unit provides financial advice, products and services. Co.'s Wealth Management business unit provides integrated advice and investment solutions. Co.'s Capital Markets business unit provides integrated credit and global markets products, investment banking advisory services and research. As of Oct 31 2017, Co. had total assets of C$565.26 billion and total deposits of C$439.71 billion.

Canadian Imperial Bank of Commerce Cl A

CANADIAN IMPERIAL BANK OF COMMERCE Pfd. CL A

Canadian Imperial Bank of Commerce Series 32 Pfd.

NATIONAL BANK OF CANADA

National Bank Of Canada

NATIONAL BANK OF CANADA

National Bank of Canada

National Bank of Canada is a provider of financial services that include banking and investment solutions for individuals and businesses as well as securities brokerage, insurance and wealth management services. Co. operates in three business segments: Personal and Commercial, which encompasses the banking, financing, and investing services; Wealth Management, which comprises investment solutions, trust services, banking services, lending services and other wealth management solutions; and Financial Markets, which encompasses banking services, investment banking services and financial solutions. At Oct 31 2017, Co. had total assets of C$245.83 billion and total deposits of C$156.67 billion.

National Bank of Canada PFD Series 40

National Bank of Canada Pfd. Series 15

NATIONAL BANK OF CANADA PR X Pfd.

NATIONAL BANK OF CANADA- PFD

NATIONAL BNK CAN Pfd.

ROYAL BANK CANADA MONTREAL QUEBEC PR J Pfd.

ROYAL BANK OF CANADA

ROYAL BANK OF CANADA

ROYAL BANK OF CANADA

ROYAL BANK OF CANADA

Royal Bank of Canada

Royal Bank of Canada

Royal Bank of Canada is a financial services company that provides personal and commercial banking, wealth management services, insurance, investor services and capital markets products and services. Co. serves personal, business, public sector and institutional clients through offices in Canada, the U.S. and 37 other countries. Co. is organized into five segments: Personal and Commercial Banking, which is comprised of Co.'s personal and business banking operations, and its auto financing businesses; Wealth Management, Insurance; Investor and Treasury Services; and Capital Markets. As of Oct 31 2017, Co. had total assets of C$1.21 trillion and total deposits of C$789.64 billion.

Royal Bank Of Canada - Pref Share

Royal Bank of Canada 1st Pfd.

Royal Bank of Canada 1st Pfd.

Royal Bank of Canada 1st Pfd. Series AE

Royal Bank of Canada 4.90% Pfd. Series W

Royal Bank of Canada Pfd.

Royal Bank of Canada Pfd. H

ROYAL BANK OF CANADA- PFD

ROYAL BANK PR M Pfd.

ROYAL BANK PR P Pfd.

ROYAL BANK PR Q Pfd.

TORONTO DOMINION BANK

TORONTO DOMINION Pfd.

TORONTO-DOMINI Pfd.

TORONTO-DOMINION BANK

TORONTO-DOMINION BANK

TORONTO-DOMINION BANK

TORONTO-DOMINION BANK

TORONTO-DOMINION BANK

TORONTO-DOMINION BANK

TORONTO-DOMINION BANK

TORONTO-DOMINION BANK

TORONTO-DOMINION BANK

Toronto-Dominion Bank

Toronto Dominion Bank provides financial services. Co.'s segments comprised of: Canadian Retail, which include Canadian personal and commercial banking businesses, Canadian credit cards, TD Auto Finance Canada and Canadian wealth and insurance businesses; US Retail, which includes the US personal and commercial banking businesses, US credit cards, TD Auto Finance US, US wealth business and the Bank's investment its subsidiary, TD Ameritrade Holding Corporation; and Wholesale Banking, which provides a range of capital markets, investment banking, and corporate banking products and services. As of Oct 31 2017, Co. had total assets of C$1.28 trillion and total deposits of C$832.82 billion.

TORONTO-DOMINION BANK C Pfd.

TORONTO-DOMINION BANK D Pfd.

Provider
DBRS Morningstar
DBRS Morningstar

DBRS Morningstar is a global credit ratings business with 700 employees in eight offices globally. DBRS and Morningstar Credit Ratings are committed to empowering investor success, serving the market through leading-edge technology and raising the bar for the industry.

Together, we are the world’s fourth largest credit ratings agency and a market leader in Canada, the U.S. and Europe in multiple asset classes. We rate more than 2,600 issuers and 54,000 securities worldwide and are driven to bring more clarity, diversity and responsiveness to the ratings process. Our approach and size provide the agility to respond to customers’ needs, while being large enough to provide the necessary expertise and resources. For more details visit us at dbrs.com.

Analysts
Carl De Souza

Michael Driscoll

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