If you’re an uninsured mortgage holder in Canada, you won’t have to undergo a stress test to switch lenders.
Effective today, the Office of the Superintendent of Financial Institutions (OSFI) said it will no longer require federally regulated financial institutions to apply the minimum qualifying rate (MQR) when seeking a straight switch for uninsured mortgages.
A straight switch is when an existing mortgage is transferred from one lender to another without changing the amount or the amortization period.
The OSFI said that the change will allow financial institutions to take “reasonable risks” while balancing its prudential mandate.
When straight switches are being considered, the OSFI said institutions should still follow the same standards for new loans.
The borrower and their ability to service debt and take on economic changes, like reduced income or higher interest rates, should be reviewed.
The timing of this announcement comes with the introduction of the new loan-to-income (LTI) limits on uninsured mortgage portfolios.
“While both measures are intended to reduce mortgage lending risks, the LTI limits are expected to contain overall residential mortgage credit risk to institutions,” stated the OSFI.
These are among a few other significant mortgage reforms that have taken place in Canada this year.
In September, the Department of Finance announced it would expand eligibility for 30-year mortgage amortizations to all first-time homebuyers and Canadians who purchase new builds.
🧵We’re introducing the boldest mortgage reforms in decades to help more Canadians buy and afford a home.
Here’s what we’re doing:
— Chrystia Freeland (@cafreeland) September 16, 2024
Starting December 15, 2024, first-time homebuyers and those buying new builds will be eligible for the 30-year mortgage loan.
Ottawa will also raise the price cap for insured mortgages to $1.5 million on December 15. This aims to help more Canadians qualify for one with a downpayment below 20%. This cap hasn’t been adjusted since 2012.
These measures are in addition to the bolstered Canadian Mortgage Charter, which allows all insured holders to switch lenders at renewal without being subject to another stress rest.
With files from Isabelle Docto