New rules make mortgage renewals easier for Canadians

The Office of the Superintendent of Financial Institutions (OSFI) recently announced a new rule for uninsured mortgages in Canada. Uninsured mortgages no longer require stress-testing at renewal, which could save Canadian homeowners thousands of dollars.

Here’s what you need to know about the new rule

For years, many Canadians felt bound to their current mortgage lender at renewal time. A key reason for this was the stress test, which is essentially an assessment designed to ensure borrowers can handle their mortgage payments in a rising interest rate environment. This stress test often prevented homeowners from switching lenders at renewal or refinance, leading many to accept renewal offers that weren’t necessarily in their best financial interest.

With the recent policy change, the stress test requirement for uninsured mortgages was removed, which means homeowners can now switch lenders more freely without facing this additional hurdle. This change comes at a crucial time, with approximately $350 billion in mortgages set to renew next year – up from around $250 billion this year – making it essential for homeowners to take advantage of this opportunity.

It’s important to shop different lenders

At Homewise, we’ve already noticed a significant uptick in homeowners seeking better options at renewal, especially through our partner embeddable rate aggregators. As this trend continues, we expect even more Canadians to start shopping around for competitive alternatives and take the time to see what else is out there.

It’s crucial to keep in mind that lenders have teams focused on maximizing profits, which often leads them to offering you higher rates when it is time for renewal. That’s one of the reasons our team at Homewise emphasizes to never settle for your lender’s offer at renewal. By simply exploring other options, you could save a considerable amount of money. For example, our team has been able to consistently secure our clients new rates up to 0.4 per cent less than their existing lender at renewal.

To get the best deal, it’s essential to start shopping around at least four months before your renewal date. Begin by reviewing your current lender’s offer, then reach out to a mortgage broker to see what alternatives are available. A broker can provide access to a broader range of lenders, rates and features – making it easier to find a competitive deal compared to your home bank.

Navigating the higher rate environment

Given the current economic climate and rising interest rates, the importance of this change cannot be overstated. Many homeowners are understandably anxious about renewing their mortgages, especially if their current rates are significantly higher than those available on the market. This new rule sets out to encourage more competition, which could eventually lead to lower rates for borrowers.

It’s also worth noting that this announcement is coming off the tail of two other policy changes. Last month, the government revealed plans to expand the amortization period for insured mortgages to all first-time buyers and purchasers of new builds from 25 to up to 30 years, as well as raise the cap from $1 million to $1.5 million. Together, these announcements are likely to heat up the housing market, emphasizing the need for homeowners to carefully explore their lending options.

The benefits of switching lenders

Switching lenders at renewal can offer several advantages beyond just securing a lower interest rate. Here are a few benefits to consider:

1. Getting a better rate: Of course, this is the obvious based on what is noted above, but shopping lenders to get a better rate can save borrowers thousands of dollars.

2. Improved features: Beyond rates, new lenders may offer more favorable features, such as reduced fees or more flexible repayment options.

3. Enhanced customer service: Working with a broker, such as ours at Homewise or someone similar, provides advice that you may not get when just accepting your renewal. This can be insights into what the right term may be, money-saving ideas and more.

4. Potential for cashback: Some lenders offer cash-back incentives for switching, which can help cover moving costs or other expenses.

These recent changes to mortgage renewal rules in Canada provide a valuable opportunity for homeowners to reassess their mortgage options. With the elimination of stress testing for many types of mortgages, switching lenders has never been easier. By taking the time to shop around with a company such as ours at Homewise, you can position yourself to secure a better rate, improve your mortgage terms and ultimately save a significant amount of money.