Big News for Homeowners
The Office of the Superintendent of Financial Institutions (OSFI) has announced a significant change in the mortgage landscape that will benefit many Canadian homeowners. Effective soon, borrowers with uninsured mortgages will no longer be required to complete a stress test when switching lenders at renewal time.
What Does This Mean for Homeowners?
Previously, when homeowners with uninsured mortgages (those with a down payment of 20% or more) wanted to switch lenders at renewal, they had to pass a stress test to qualify for a new mortgage. This requirement often discouraged borrowers from shopping around for better rates, limiting their options. Now, with this change, borrowers can move to another lender without undergoing a stress test, as long as they keep their existing loan amount and amortization schedule.
Why Was This Change Made?
The stress test requirement has been flagged within the mortgage industry as a potential barrier for homeowners looking to get the best deal at renewal time. OSFI acknowledged that this policy created an imbalance between insured and uninsured mortgage renewals. Although the measure was initially put in place to safeguard against certain risks, those risks have not materialized, leading to this positive adjustment.
What Else Is Changing in Canada’s Mortgage Guidelines?
This change is part of a series of recent updates to Canada’s mortgage guidelines. Just last week, the federal government announced two key changes:
The cap on insured mortgages has been increased to $1.5 million.
30-year amortizations are now available for first-time homebuyers and Canadians purchasing newly built properties.
A Win for Borrowers
Lauren van den Berg, President and CEO of Mortgage Professionals Canada (MPC), described the removal of the stress test as a “significant win” for Canadians. This change will allow borrowers to secure the best rate at renewal time, providing them with more options and promoting healthy competition among lenders.
What’s Next?
OSFI plans to formally communicate the new renewal policy in its next quarterly release on November 21. While this shift is a positive step toward enhancing competition and ensuring Canadians can access the best mortgage options, it also signals a more collaborative approach between the regulator and financial institutions to ensure the smooth implementation of the new rules.
If you have questions about how this change might impact your mortgage renewal or want to explore your options, please reach out to our team! We’re here to guide you through these evolving mortgage policies and help you make the best financial decisions.