Lender adjusts debt service ratio and flags higher risk amid rising trade tensions
The Bank of Montreal (BMO) has revised its mortgage policies for borrowers in the steel and aluminum industries, citing growing risks tied to the unfolding tariff war.
In a memo sent to brokers this week, BMO announced it is tightening some of its lending criteria for self-employed borrowers working in tariff-impacted sectors. The bank has lowered the allowable total debt service (TDS) ratio for these clients from 44% to 42%, reducing the maximum mortgage amount they may qualify for. It said the change is intended to give borrowers more breathing room in their monthly budgets.
“With newly announced tariffs between Canada and the United States, and consideration to the turbulent economic landscape, BMO BrokerEdge has reviewed its risk appetite for tariff-impacted industries,” the memo stated. “As a result, we have revised our temporary lending criteria for self-employed borrowers.”
Bank of Montreal also added the steel and aluminum sectors to its list of industries considered higher risk, known internally as limited appetite industries. That list already includes sectors such as utilities, construction, and transportation, where the bank maintains a slightly reduced risk tolerance.
Canada, the top foreign supplier of steel and aluminum to the US, recently imposed 25% retaliatory tariffs on a wide range of American-made goods, including metals, computers, and sports equipment. The move was in response to US president Donald Trump’s tariffs on Canadian steel and aluminum.
Industry leaders have voiced concerns about the impact of the tariffs on Canadian workers and have called for government support. In response, Prime Minister Mark Carney announced late Friday a series of relief measures designed to shield businesses and workers from the fallout.
According to Bloomberg, these include temporary deferrals on corporate income tax and consumption tax remittances between April 2 and June 30. The federal government will also roll out a new financing facility and streamline access to support programs for affected workers.
“These measures as a whole will help our workers, help keep our businesses running, and protect our economy during this phase of the trade war,” said Carney.
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A spokesperson for BMO emphasized that the mortgage changes were precautionary and not intended to penalize workers in affected sectors.
“These measures would not impact workers and were meant to protect customers’ long-term financial health,” the spokesperson said, adding that such policy adjustments are standard and reflect a range of factors, including changes in the broader economy.
BMO is the first Canadian bank to make such a move in response to the trade conflict. But more changes could be on the horizon.
Toronto-based mortgage broker David Larock, owner of Integrated Mortgage Planners, described BMO’s policy shift as a “minor” change and said he expects other lenders to introduce similar measures as the situation evolves.
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