The Office of the Superintendent of Financial Institutions (OSFI) says Canadian lenders remain resilient despite a risk environment clouded by trade tensions, rising unemployment and ongoing housing market pressures.
In its fall semi-annual update to the Annual Risk Outlook (ARO), the regulator warned that a weaker economy is weighing on cash flows, collateral values and confidence.
OSFI pointed in particular to the uncertainty surrounding tariffs, which has slowed activity among lenders, borrowers, consumers and suppliers. “The lack of clarity on tariffs is generating unease amongst consumers and businesses facing an outlook highly sensitive to the outcomes of the on-going negotiations,” the report said.
Housing market strains deepen
OSFI also highlighted ongoing weakness in the housing market, where activity remains below 10-year averages and prices continue to soften.
“The condo market in Canada, especially in the GTA and GVA regions, is under pressure and has deteriorated further since the issue was highlighted in the spring ARO,” the regulator noted.
Delinquencies are also climbing back toward pre-pandemic levels, particularly in fixed-payment variable-rate mortgages, self-employed loans and investor portfolios.
Toronto is leading major centres in delinquency rates, while the condo segment has emerged as the weakest link in the market. Oversupply in new multi-unit construction is driving down prices and could reduce investor appetite for future projects—pressuring both collateral values and employment in the construction sector.
Although the risk of mortgage payment shocks has eased somewhat thanks to seven Bank of Canada rate cuts since June 2024, OSFI cautioned that a subset of borrowers renewing loans originated at historically low rates will still face significant increases.
As of May 2025, nearly one-third (31%) of all outstanding mortgages will renew by 2027, OSFI said.
Regulatory focus on underwriting and liquidity
In response, OSFI said it is stepping up its oversight of mortgage underwriting, including Guideline B-20’s standards on prudent lending and the use of blanket appraisals. This summer the regulator reinforced expectations around timely and substantiated property valuations to ensure collateral values are realistic.
It is also monitoring how lenders are adapting to the newly introduced loan-to-income (LTI) measure and how they are managing risks tied to variable-rate fixed-payment mortgages.
“We are closely examining adherence to the newly implemented loan-to-income measure and assessing mortgage lenders’ VRMFP risk management practices,” the report said.
On the funding side, OSFI is advancing revisions to its Liquidity Adequacy Requirements and an Internal Liquidity Adequacy Assessment Process, with additional consultations to follow in 2026. The regulator is also paying closer attention to how institutions manage liquidity at their foreign operations.
“Given our concerns about unexpected economic outcomes, and the potential for broad financial market strain due to continued uncertainty, we are focused on institutional preparedness for stress events,” OSFI said.
Visited 42 times, 42 visit(s) today
blanket appraisals condo market delinquencies fixed-payment variable mortgages housing risks loan-to-income cap LTI Office of the Superintendent of Financial Institutions OSFI regulations regulator
Last modified: October 9, 2025
