Homeowners will no longer need to do stress test when switching mortgage providers - Action News
Home WebMail Thursday, November 14, 2024, 11:44 AM | Calgary | 6.4°C | Regions Advertise Login | Our platform is in maintenance mode. Some URLs may not be available. |
Business

Homeowners will no longer need to do stress test when switching mortgage providers

The national banking regulator says it will no longer require borrowers with uninsured mortgages to undergo a stress test when switching providers.

Decision aimed at correcting imbalance between insured, uninsured homeowners at time of mortgage renewal

A row of houses with colourful fronts is shown from an aerial view.
The Office of the Superintendent of Financial Institutions says it will end a policy that created an imbalance between uninsured and insured borrowers. (Darryl Dyck/The Canadian Press)

The national banking regulator says it will no longer require borrowers with uninsured mortgages to undergo a stress test when switching providers.

The Office of the Superintendent of Financial Institutions says it will end the policy for lenders to apply the minimum qualifying rate to straight switcheswhen uninsured mortgages are renewed at a different institution under theborrower's current amortization schedule and loan amount.

OSFI says the change comes after feedback from the industry and Canadians "about the imbalance between insured and uninsured mortgagors at the time of mortgage renewal." It also says data shows the risksthe requirement had been intended to address "have not significantly materialized."

In March, Canada's Competition Bureau recommended allowing uninsured mortgage borrowers to switch between banks without undergoing a stress test, saying the policy was "not applied evenly."

The stress test requires federally regulated financial institutions to ensure borrowers can still make mortgage payments if they experience financial shocks, such as an increase in mortgage interest rates or an increase in household expenses.

WATCH | Unpacking what recent rate cuts in the U.S. and Canada mean:

Are Canadian mortgage rates about to plummet? | About That

23 days ago
Duration 8:34
The U.S. Federal Reserve slashed interest rates for the first time in four years, and in the same week, Canada's inflation rate reached the Bank of Canada's two per cent target. Andrew Chang explains why this is prompting economists to predict more aggressive rate cuts are on the horizon.

The regulator says it is working with financial institutions to ensure they are prepared for the change, which it intends to formally communicate as part of its next quarterly release on Nov. 21.