Will OSFI bend to the 'uninsured renewal' pressure? Doubtful.
Especially because OSFI has already responded to the competition watchdog plea with a hard 'no.'
The pressure on OSFI to remove the stress test for all mortgage renewals isn't new.
Ever since mortgage rates skyrocketed to current heights, many have argued sans report (including here at True North) that if borrowers originally qualified under the stress-test rate, they shouldn't have to do so again.
Plus, OSFI is always getting flack about "going too far" — as evidenced in this CMT Mortgage Trends article from 2017.
Yet, many have agreed with OSFI (after the fact) that the stress test did prepare homeowners to better handle today's rates (the highest interest rates since the 90s). Mortgage arrears, though recently on the increase as high rates drone on, have hovered near record lows up to this point.
Here's why OSFI isn't likely to (ever) budge on this one.
This government body isn't about borrower's rights. It exists solely to protect Canada's banking infrastructure and rarely yields to political pressure.
Banks are making more money with the uninsured-switch rule, which helps to protect them against the higher risk of uninsured mortgages (which are not government-protected like insured mortgages and, therefore, exposed to the risk of default).
Despite more hardship for homeowners, relaxing the stress test for uninsured mortgage renewals takes away this profitability cushion, and OSFI isn't likely to even consider making a change.
At True North, we'd be thrilled if OSFI turned around to remove this rule.
Homeowners will have to look to their own devices (and get great advice and their best rate) to try to increase their home affordability numbers at renewal. And wait until interest rates finally start dropping (how long is the real question).
Didn't OSFI already bend by allowing insured mortgages to escape the renewal stress test?
Short answer? No.
Here's the longer answer. In October 2023, the Canadian Government Finance Minister brought forward a new Mortgage Charter outlining guidance for homeowners (a general compilation and rehashing of rules that already existed).
In it, it stated that insured mortgages didn't have to re-qualify through the federal stress test to switch lenders at renewal. Some people thought, wow, OSFI relented. Except they didn't.
Apparently, this long-standing' OSFI rule was living in the OSFI fine print, and the regulator re-highlighted it in the fall of 2023 (lenders were unaware and scrambled to make the adjustments to their mortgage approval process).