Real estate experts say competition among lenders is expected to rise following a move by Canada’s banking regulator to officially remove stress test requirements for some homeowners looking to switch mortgage lenders at renewal.
The Office of the Superintendent of Financial Institutions (OSFI) announced Thursday that uninsured mortgage straight switches will be exempt from the minimum qualifying rate (MQR). OSFI previously stated in September that it would ease stress test requirements for uninsured mortgages when switching providers, stating its intentions at the time to formally communicate the change in its Nov. 21 quarterly release.
“This eliminates a barrier that previously prevented borrowers from accessing better rates. The new rule will foster a more competitive lending environment where consumers have greater freedom to choose the best mortgage product, encouraging lenders to offer more attractive terms to retain customers,” Leah Zlatkin, a licensed mortgage broker and LowestRates.ca expert, said in a statement Thursday.
Victor Tran, a RATESDOTCA mortgage and real estate expert, said in a statement Thursday that the change will help “a number of uninsured borrowers.” He added that competition among lenders will likely spur them to “take a more active approach when offering renewal rates.”
Tran said the change could allow uninsured borrowers switching at renewal to see “significant savings” as they would have access to more options for lenders as well as mortgage products.
Penelope Graham, a mortgage expert at Ratehub.ca, said in a statement Wednesday that the new policy will apply to any mortgage owners making a straight switch to a new lender, which means their original amount and amortization length will be the same.
She added that requiring borrowers looking to switch lenders at renewal to the MQR had been a point of contention within the industry ever since the stress test was introduced in 2018.
According to Graham, the previous requirement led to more borrowers automatically staying with their existing lender, “potentially leaving thousands of dollars on the table.”
“Dropping the MQR stress test requirement for uninsured mortgage borrowers has evened the playing field and will also encourage improved competition among lenders for new clients’ business at renewal time,” she said.
“Removing this barrier to switching to a new lender will incentivize mortgage shoppers to explore their options, and perhaps make a change that is more financially advantageous to them.”
OSFI said in September that the change was the result of feedback from industry players as well as Canadians. Additionally, the Competition Bureau recommended in March allowing uninsured borrowers the ability to switch banks without a stress test.
With files from the Canadian Press