Starting November 21, the Office of the Superintendent of Financial Institutions (OSFI) will remove the Minimum Qualifying Rate (MQR) for straight switches of uninsured mortgages. This move is set to ease the process for homeowners to switch lenders at the time of mortgage renewal, offering them more flexibility and better rates without facing the barrier of a stress test.

What’s Changing

For years, borrowers with uninsured mortgages—those with down payments of 20% or more—have been subject to the stress test, introduced in January 2018. The stress test required them to qualify for a new mortgage at either the Bank of Canada’s five-year benchmark rate or their mortgage rate plus 2%. This was meant to ensure borrowers could manage potential future rate hikes.

However, come November 21, the stress test will no longer apply to straight switches. This applies to borrowers who transfer their mortgage to a new lender without changing the loan amount or the amortization schedule.

Why Is OSFI Making This Change?

OSFI's recent reversal on its earlier stance stems from two main reasons:

1. Feedback from Industry and Consumers: There’s been an increasing call from both the mortgage industry and homeowners, highlighting the unfair burden placed on uninsured borrowers compared to insured ones at the time of renewal.

2. Low Prudential Risk: OSFI’s review of data revealed that the risk the stress test was intended to mitigate—borrowers defaulting due to rising rates—hadn’t significantly materialized. Therefore, OSFI decided to relax the rule while still encouraging competitive lending.

How This Benefits Homeowners

The removal of the stress test is a significant win for homeowners. As Ron Butler from Butler Mortgage puts it, "It never made any sense to apply a stress test on a renewal.” Now, borrowers with uninsured mortgages will have greater freedom to shop for the best interest rates without the worry of being disqualified due to the stress test.

Without this requirement, borrowers can negotiate better deals with new lenders, potentially easing their financial burden in a rising interest rate environment. This change will foster greater competition among lenders and result in more favorable options for borrowers.

Why This Matters Now

With interest rates fluctuating and the cost of borrowing on the rise, this change couldn’t come at a better time. Homeowners looking to renew their mortgage will benefit from increased flexibility and better deals without having to prove they can afford their loan under a higher rate scenario.

It’s also expected to boost lender competition, providing homeowners with a wider array of choices. Lauren van den Berg, CEO of Mortgage Professionals Canada, said this change is a “significant win for Canadians” and will help create a more balanced market.

Final Thoughts

If your mortgage renewal is coming up and you have an uninsured mortgage, this is a game-changer. No longer bound by the stress test, you can now explore better rates and potentially reduce your monthly payments. The mortgage market is always changing, and this latest update can help make homeownership more accessible for many Canadians.

Ultimately, the right time to make a move is when you feel financially ready. If you’ve got job stability, a strong credit score, and savings for a down payment, now could be a great time to lock in a favorable rate and take advantage of these new reforms.

For more information and guidance on your next mortgage move, feel free to reach out.