OTTAWA -- Canadians looking to buy homes will face stiffer mortgage tests in a few days as the federal government and a national regulator tighten rules in the wake of new warnings from the central bank that households are piling on too much debt.
In its latest financial system review, the Bank of Canada said many households have taken on large mortgages compared with their income, limiting their flexibility to deal with an unforeseen financial shock like the loss of a job.
Total household debt has increased by four per cent since the start of the pandemic, picking up sharply since the middle of last year as the housing market started to heat up. The percentage of costly loans, defined by the bank as those more than 4.5-times a household's income, have also risen above the peaks seen five years ago when policy-makers tightened mortgage rules.
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