Canada’s banking regulator is raising concerns about how some mortgage approvals are being handled as condominium prices decline across major cities like Toronto and Vancouver.
New documents obtained by Reuters show that the Office of the Superintendent of Financial Institutions (OSFI) warned major Canadian banks about the risks of using “blanket appraisals” for condo mortgages during a market downturn.
The warning comes as Canada’s housing market experiences one of the sharpest price declines among major global economies.
What Are Blanket Appraisals?
A blanket appraisal occurs when a lender approves mortgages using the property value at the time the buyer signed the purchase agreement rather than the market value at the time the unit closes.
This approach is commonly used for pre-construction condos where hundreds of units are sold in a development before construction is completed.
While the model works well when housing prices are rising, regulators say it becomes far more risky when the market declines.
OSFI noted that relying on older valuations could lead to mortgage approvals that exceed the legal lending limits under federal banking law.
Why Regulators Are Concerned
Under Canada’s Bank Act, uninsured mortgages cannot exceed 80 percent of a property’s market value at the time the loan originates.
If lenders rely on outdated valuations from the purchase date instead of the closing date, falling condo prices could mean the mortgage actually exceeds that 80 percent threshold.
According to documents reviewed by Reuters, OSFI warned that this could constitute a potential breach of federal mortgage rules.
The regulator has been reviewing mortgage approval practices more closely as housing prices weaken.
Condo Prices Have Dropped Significantly
Canada’s housing market has cooled considerably since its peak in 2022.
Recent data shows:
- Canada experienced one of the largest housing price declines among major economies last year
- National home prices fell approximately 2.7 percent in 2025
- Some pre-construction condo values have dropped between 10 percent and 30 percent from their peak
The price decline has been driven by a combination of higher interest rates, weaker investor demand, slower population growth, and an oversupply of condo units in major urban markets.
In cities like Toronto and Vancouver, thousands of newly completed condo units remain unsold or unoccupied as demand has softened.
Unsold Condos Are Changing the Market
During the housing boom between 2018 and 2022, developers rushed to build new condo towers to meet strong investor demand.
Many of those units are now reaching completion in a much weaker market environment.
As prices decline, some buyers are discovering that their units may be worth less than what they originally agreed to pay.
This creates potential risks for lenders if buyers walk away from their purchases or default on their mortgages.
Banks Adjusting Mortgage Practices
OSFI also raised concerns about how some banks marketed pre-construction mortgage approvals.
In regulatory meetings last fall, the agency pointed to marketing language used by lenders that suggested buyers would remain approved for their mortgage until the closing date.
According to archived website data, Royal Bank of Canada previously promoted pre-construction mortgage approvals that stated buyers would “stay approved until your closing date.”
Following discussions with regulators, RBC revised the language on its website.
The bank now states that mortgage approvals are based on the builder’s expected closing date rather than guaranteeing approval until closing.
RBC said it continues to work closely with regulators to ensure its mortgage practices meet expectations.
What This Signals for Canada’s Housing Market
The regulator’s warning highlights growing concern about the broader risks posed by Canada’s cooling housing market.
If condo prices continue to decline, both lenders and buyers could face increasing financial pressure.
For banks, stricter scrutiny of mortgage approvals could become more common as regulators aim to maintain stability in Canada’s financial system.
For buyers and investors, the situation is another reminder that the condo market has shifted significantly since the housing boom years.
References
Reuters. (2026, March 9). Canada’s banking regulator warns major lenders about appraisal practices as condo prices crash.
Office of the Superintendent of Financial Institutions. (2026). Mortgage underwriting guidance and regulatory framework. https://www.osfi-bsif.gc.ca
Canadian Bankers Association. (2026). Mortgage lending practices and industry standards. https://www.cba.ca
Canada Housing Market 
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