Ottawa - Canadian banking regulators are tightening requirements for some types of mortgages to protect homeowners who may be at greater risk from rising interest rates.

For its part, the Office of the Superintendent of Financial Institutions (OSFI) said the changes may affect shared loan plans such as reverse mortgages or loans with shared equity features, which have grown in popularity in recent years but may be riskier for lenders.

As for borrowers who owe more than 65 percent of the loan value, a portion of their payments must go toward the principal of the loan rather than the interest until the loan falls below this threshold.

OSFI said the changes will generally come into effect the next time borrowers renew their plans after the end of fall 2023, in line with the lender’s fiscal year.

The central financial regulator said consumers will not see an increase in monthly payment requirements as a result of this change, and this step will not affect new homebuyers.

Data from the Bank of Canada shows shared loan plans exceeding 65 percent of the loan value amount to $204 billion out of $1.8 trillion of total outstanding residential mortgages in the country.

Edited by: Dima Abu Khair