Starting on November 21, 2024, Canadian mortgage holders with uninsured loans will be able to switch lenders at the time of renewal without having to undergo a stress test, according to the Office of the Superintendent of Financial Institutions (OSFI).

What Is the Stress Test?

When applying for a mortgage, borrowers are required to pass a stress test. This ensures that they can afford their mortgage payments at an interest rate two percentage points higher than their offered rate. However, until now, only borrowers with insured mortgages were exempt from retaking the stress test when switching lenders at renewal.

This new rule now extends the exemption to uninsured mortgage holders, making it easier for them to shop around for better rates without the barrier of a stress test.

Why the Change?

The sharp rise in mortgage rates over the past two years made it increasingly difficult for uninsured borrowers to pass the stress test when trying to switch lenders. OSFI’s new rule seeks to address this inequity and promote competition in the mortgage market.

“There are two main reasons for this change. First, we listened to feedback from the sector and Canadians about the imbalance between insured and uninsured mortgage borrowers at renewal. Second, over time, we observed that the risks this measure was intended to mitigate did not materialize significantly,” OSFI explained.

A Win for the Mortgage Industry

The announcement has been hailed as a significant victory by the mortgage industry. The CEO of Mortgage Professionals Canada, Lauren van den Berg, expressed that the change will allow homeowners to secure the best rate for their financial needs and promote healthy competition among lenders.

Mortgage brokers across the country have long advocated for this policy, which is expected to benefit both borrowers and the industry by providing more flexibility and encouraging more competitive mortgage options.