02:40 PM EDT, 04/12/2024 (MT Newswires) -- Canada's banking regulator is capping the amount of highly leveraged loans in lenders' residential mortgage portfolios, The Globe and Mail is reporting Friday.

The Globe claimed that it was the first, last month, to report that the Office of the Superintendent of Financial Institutions (OSFI) had told banks they will be subject to limits on their mortgage loans that will restrict the number they can offer above 4.5 times a borrower's income, which is also known as a loan-to-income (LTI) ratio of 450%.

In the new rules announced Friday, the regulator said that high household debt poses a risk to the "safety and soundness" of banks and the stability of the financial system.

"High LTI loans originated during the low interest rate time periods have created a long-term vulnerability to the Canadian financial system," OSFI said. "OSFI's LTI framework will help prevent a similar buildup of loans on books given to highly leveraged and indebted borrowers in the future."

Elsewhere, The Globe and Mail reports, the federal Liberals capped off a run of prebudget housing announcements with new pledges on Friday, including plans to crack down on mortgage and real estate fraud, to restrict the purchase of single-family homes by large, corporate investors and to provide low-interest loans of up to $40,000 for secondary suites.

The Globe noted the government says its strategy envisions 3.87 million new homes built in Canada by 2031. But the Globe said that "will be a challenge", given that the Canada Mortgage and Housing Corporation said just last week that housing starts are expected to decline this year before recovering in 2025 and 2026, reflecting the lagged effect of higher interest rates on new construction.

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