OSFI Removes Stress Test Requirement for Mortgage Renewals, Increasing Competition Among Lenders
OSFI Removes Stress Test Requirement for Mortgage Renewals, Increasing Competition Among Lenders
Canada's banking regulator, OSFI, has eliminated the mortgage stress test requirement for borrowers renewing with a new lender, making it easier to switch lenders. This change is expected to enhance competition among banks and provide homeowners with better opportunities to secure lower interest rates.
Key Takeaways:
- Stress test eliminated for borrowers switching lenders during mortgage renewal.
- The move boosts competition among banks, helping homeowners secure better rates.
- The change is expected to remove a key barrier to switching, providing more choice and financial relief for consumers.
Canada’s banking regulator, the Office of the Superintendent of Financial Institutions (OSFI), has announced it will no longer require borrowers to pass the mortgage stress test when renewing their mortgages with a new lender. Previously, borrowers had to prove they could afford a rate two percent higher than the actual offer, making it harder to switch lenders and locking many into higher interest rates with their current banks. This change, which applies to uninsured mortgages (those with at least a 20% down payment), is designed to make switching more accessible and improve competition in the mortgage market.
Mortgage brokers are hailing the move as a positive development for consumers, noting that it removes an "unnecessary" barrier. The stress test often left borrowers with little negotiating power during renewals, allowing lenders to charge higher rates without fear of losing clients. Now, homeowners will have more leverage to shop around for better offers and force their current lender to match the best rates available, saving them money.
Increased competition among lenders is expected to benefit consumers by encouraging banks to offer more competitive pricing. With more choices available, homeowners will have better opportunities to secure lower interest rates, providing much-needed relief amid rising mortgage renewal costs.
Source: Toronto Star
