Homeowners who switch lenders when your mortgage term is up for renewal will no longer be subject to stress-test rules – which add a 2% rate surcharge when qualifying your mortgage – as of November 21st, 2024.
This change provides added flexibility so your mortgage agent can shop around with different lenders to find the best mortgage features and rates when you’re up for renewal, and qualification will be easier if you’re doing a straight switch/transfer of your mortgage at renewal time.
Previously, borrowers who wished to switch lenders at renewal had to pass the stress test, which requires proving they can handle payments at either the contract rate plus 2% or the Bank of Canada’s five-year benchmark rate, whichever is higher. This policy, introduced in 2018, was designed to ensure borrowers could withstand future rate increases, but it had unintended consequences. Many Canadians, even those with solid payment histories, were unable to switch lenders and had to accept less favourable terms with their current lenders, diminishing competition in the mortgage market.
The new policy aims to rectify this by eliminating the stress test requirement for those who are simply switching lenders at renewal, provided you’re not seeking to borrow additional funds.
This change should increase competition among lenders, potentially leading to better rates and terms for borrowers. It’s a win for consumers, particularly those with higher fixed payments in today’s economic climate.
Two additional changes coming into effect December 15th
The announcement that the stress test will be eliminated on straight mortgage switches/transfers comes on the tail of the federal government unveiling huge changes to Canada’s mortgage system September 16th, 2024 aimed at helping make homeownership more attainable for first-time homebuyers as well as Canadians purchasing newly-built homes.
This is exciting news for homebuyers, effective December 15th, 2024:
- Raising the insured mortgage limit to $1.5 million, which will expand access for Canadians in high-priced housing markets by helping more borrowers qualify for a mortgage with a downpayment below 20%. That’s an increase from the current insured mortgage cap of $1 million set in 2012.
- Expanding access to 30-year amortizations for all first-time homebuyers and all buyers of new builds, including condos, in order to help reduce monthly payments.
Have questions about any of these upcoming changes or your mortgage in general? Answers are a call or email away!