Banking regulator to relax stress-test rules for homeowners switching lenders at mortgage renewal

Canada’s banking regulator is set to relax mortgage rules for homeowners who switch banks when they renew their loans.

The Office of the Superintendent of Financial Institutions (OSFI) will no longer require banks to apply the mortgage stress test on borrowers who switch lenders if they are simply renewing their loan, the regulator told The Globe and Mail on Wednesday.

The change, which is due to take effect Nov. 21, will make it easier for borrowers with uninsured (20% equity or more) mortgages to move to a different bank at renewal. It is also expected to motivate banks to offer cheaper mortgage rates in order to retain their current borrowers and attract new customers.

The change marks a significant win for the mortgage industry, which had been pushing for this relief in the face of rising interest rates.

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