10/10/2025
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Posted in Canada Living by Vanguard Realty | Back to Main Blog Page
Canada’s financial watchdog has sharpened its focus on two emerging threats - tariffs and housing market strains - amid ongoing uncertainty in the global and domestic economy.
In its fall update to the 2025-2026 Annual Risk Outlook (ARO), the Office of the Superintendent of Financial Institutions (OSFI) said that while its four core risks remain, “today’s update emphasizes two additional risks related to tariffs and housing market strains.”
The regulator’s March ARO had highlighted integrity and security, wholesale credit, funding and liquidity, and real estate secured lending and mortgage (RESL) risks.
Since then, OSFI said, “risks to the Canadian economy have evolved with the escalation of tariff discussions, rising unemployment and continued housing market pressure.”
Uncertainty over tariff negotiations has “reduced the activity of lenders, borrowers, consumers, and suppliers as they await resolution,” OSFI said.
“The threat of rising costs for key economic inputs and the potential for higher unemployment levels reduce confidence and inhibit investment.”
The agency warned that a deteriorating economic environment could “lead to reduced cashflows and weaker asset valuations.”
The housing market, already under strain before the latest trade tensions, has seen further pressure—especially in the condo segment in the Greater Toronto and Greater Vancouver areas.
“Softening economic conditions will cause more strains over the coming year,” OSFI said.
“Further declines in condo prices could negatively impact investor mortgages, drive down collateral values, and reduce investor appetite for new multi-family construction projects.”
OSFI noted that household credit delinquencies are rising, particularly among variable rate fixed payment mortgages and self-employed or investor portfolios. “Delinquency levels in Toronto continue to surpass delinquencies in other major centres,” the regulator said.
Despite these challenges, OSFI judged that Canadian financial institutions “remain well positioned to navigate the risk environment” and have “demonstrated strong financial resilience and downturn preparedness.”
Superintendent Peter Routledge said, “Over the last 15 years, OSFI has built enduring resilience into Canada’s financial system. These efforts have proven to be both necessary and effective. Our Annual Risk Outlook is one of the tools we use to identify the most significant risks on the horizon and to guide our supervisory and regulatory priorities. Building that resilience is a strategic advantage that can be leveraged to support growth in the Canadian economy.”
OSFI’s response includes ongoing scrutiny of prudent underwriting standards, portfolio management, and adherence to new loan-to-income measures. The regulator is also monitoring liquidity management and consulting on further guideline updates through 2026.
Source: Canadian Mortgage Professiona
https://www.mpamag.com/ca/mortgage-industry/industry-trends/osfi-flags-new-risks-from-tariffs-and-housing-strains-in-fall-outlook/552700
Canadian Debt, Canadian Housing Market Slowdown, Canadian Mortgage Market
