The development and use of selected macroprudential tools constitute another line of defence. In the housing market, the federal government has already taken important measures to address household leverage.
These include a more stringent qualifying test that requires all borrowers to meet the standards for a 5-year fixed-rate mortgage as well as a reduction in the maximum loan-to-value ratio of refinanced mortgages and a higher minimum down payment on properties not occupied by the owner. In addition, the Bank of Canada’s interest rate increases reminded households of the interest rate risks they face.