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Will B-20 Regulations Change?

Canada’s B-20 regulations have been controversial among Canadian mortgage professionals and many have been calling for reform. As 2020 nears, is it possible we will see changes to the mortgage stress test?

There has been much discussion in the news about this topic as talks of stress test reform transpired during the 2019 federal election. We have compiled insights from mortgage professionals to see where the future of B-20 regulations may be heading.

National Bank of Canada CEO, Louis Vachon

Louis Vachon, CEO of the National Bank of Canada, recently spoke up about his view of potential B-20 adjustments.

“I think we need to give a little bit more time to go by to assess how it’s impacting different markets in different parts of the country,” Vachon said in an interview with BNN Bloomberg.

“Canada is so big and there are big differences between what’s going on in Vancouver, Montreal and Toronto, or the western provinces,” Vachon said. “So, you really have to look at different markets.”

Nick Kyprianou, President and CEO of River Rock Mortgage Investment Corporation

Nick Kyprianou, President and CEO of River Rock Mortgage Investment Corporation, questioned the effect political influence on the mortgage stress test could have.

“Don’t forget, politicians don’t have the power to make changes with the financial institutions that people think,” Kyprianou said in an interview with Mortgage Broker News.

“OSFI [The Office of the Superintendent of Financial Institutions] runs itself. They’re not a political entity. So the politicians can say ‘we want you do this, we want you to do that,’ but at the end of the day, [OSFI is] mandated to make sure financial institutions are strong.”

Kyprianou went on to say that he thinks B-20 reform may not even be what the country — or the mortgage broker industry – needs.

“If people are thinking that B-20 and stress testing and all that’s going to be eliminated, they’re kidding themselves,” Kyprianou said.

Teranet Market Insight Forum

During the October 22, 2019 Teranet Market Insight Forum, the B-20 regulations were discussed both by Benjamin Tal, Deputy Chief Economist of CIBC World Markets, and the industry panel, comprised of Tim Hudak, CEO of the Ontario Real Estate Association; Paul Taylor, CEO of Mortgage Professionals Canada; and Dilprit Grewal, Senior Vice President of Mortgages, Secured Lending, and Project Delivery at CIBC.

Each offered their take on the necessity and opportunity for B-20 regulation reform.

Tal said he understood the need for the stress test, but he did not understand why it needed to be set at 200 bps.

“I have no problem with [the stress test] because I believe we have to save some Canadians from themselves,” Tal said.

“The issue I have is with the 200 bps. Because they impose 200 bps when interest rates are low and when interest rates are high. … To me that doesn’t make sense. It has to be more dynamic.”

Though Tal thinks the test needs to be more dynamic, he does not see that change being made in 2020.

“I think this is a bad policy but the likelihood of them changing it at this point are zil,” he said.

During the industry panel, Taylor, whose organization Mortgage Professionals Canada has been vocal about calls for stress test reform, echoed Tal’s sentiments.

“I think there’s no doubt that the stress test has certainly made qualification much more difficult for people at the bottom of the economic ladder,” Taylor said.

“It creates more of a wealth gap between the haves and the have nots. … I really think it’s time to adjust it.”

Grewal spoke to changes in consumer behaviour stemming from the mortgage stress test, including many homebuyers moving to nonprime lenders.

“What’s the cost? It’s the transfer of wealth to shareholders of those companies,” he said.

“We’ve seen bankable clients, a segment of them, that have now gone to nonprime lenders who are effectively paying more than they would have otherwise…. We’ve seen consumer behaviour modify so they’re chasing the lowest rate. One of the unintended consequences is that when floating rates are lower than fixed rates, clients are flocking to them.”

For more about the impacts of the mortgage stress test on the mortgage market share, see the Teranet Market Insights Report.

Hudak also spoke to the costs of the stress test and the cultural impacts, saying it has shifted the market so people who could previously have bought a home are now renting, leaving less rentals available for more vulnerable populations.

“Who pays the price?” Hudak asked. “It’s new Canadians, immigrants coming in. And it’s people coming from modest means. … It’s those who are struggling, who are doing the right thing and saving every buck they’ve got. They are sidelined as well as small business entrepreneurs.”

The Office of the Superintendent of Financial Institutions (OSFI)

While OSFI has been quiet on the future of B-20 regulations in the second half of 2019, in June of 2019 they released a statement about the benefits the regulations have had.

Among the impacts, they stated:

  • Mortgage underwriting quality is improving. According to OSFI data, the proportion of new uninsured mortgage loans that exceed 450 percent of a borrower’s income has stabilized at a lower rate of 14%, from a peak of 20%.
  • Rates at renewal are stable.
  • Amortization periods are not extending.

In summary, OSFI stated: “The revisions to B-20 are working; strengthening mortgage underwriting across Canada and improving the resilience of the Canadian financial system to future shocks. While improvements have been made OSFI will continue to monitor lender practices, particularly in the area of income verification, and will be proactive with lenders when it identifies areas requiring attention.”

Will we see mortgage stress test reform in 2020? Let us know what you think by sharing your opinion with us on social media. Find Purview on FacebookTwitter, and LinkedIn and leave your comment.

Whether the B-20 regulations change or stay the same, Purview has insightful property data tools that help find new leads, mitigate risk, and know more in today’s Canadian mortgage market. Discover all of our solutions by calling 1-855-787-8439 or visiting

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