OSFI (Office of the Superintendent of Financial Institutions) has confirmed that it will remove the requirement for lenders to apply the Minimum Qualifying Rate (MQR) to straight switches of uninsured mortgages.
Superintendent Peter Routledge confirmed that OSFI will formally announce this change on November 21, 2024, as part of the regulator’s quarterly release pilot, with the change coming into effect that same day.
This change will make it easier for borrowers to switch lenders at renewal without having to prove they can afford their mortgage at a higher rate.
The stress test, introduced in January 2018 under OSFI’s B-20 Guideline, required borrowers with uninsured mortgages—those with a down payment of 20% or more—to qualify at the higher of the Bank of Canada’s five-year benchmark rate or their mortgage rate plus 2%. This policy aimed to ensure borrowers could handle potential future rate increases.
The upcoming change applies specifically to straight switches of uninsured mortgages, where borrowers move to a new lender but maintain the same loan amount and amortization schedule.
Why the change? OSFI states there are two key reasons behind its reversal:
“First, we are listening to what we have heard from industry and from Canadians about the imbalance between insured and uninsured mortgagors at the time of mortgage renewal,” an OSFI spokesperson said.
“Second, when we look at the data over time, we have observed that the prudential risks that this was intended to address have not significantly materialized,” they added. “As a prudential regulator we enable banks and lenders to compete and take reasonable risks.”
Contact us to see how this change could impact you at renewal.
Source: READ the full article from the Canadian Mortgage Trends.