Canada’s bank regulator says it will not exempt uninsured borrowers from the mortgage stress test if they switch to a different lender at renewal time, a rule that has made it onerous for home owners to find a new lender and take advantage of cheaper interest rates.have been growing, as the spike in mortgage rates has made it harder for borrowers to qualify for a mortgage.
The stress test has two thresholds: a minimum qualifying rate, or MQR, that is set by the regulator and an interest rate that is two percentage points higher than the borrower’s mortgage contract. The lender must use the higher interest rate to stress test the borrower.are above that level at around 6 per cent and borrowers are stress tested at two percentage points higher at 8 per cent.
A borrower does not need mortgage insurance if they make a down payment that is at least 20 per cent of the property’s purchase price., are allowed to switch lenders without being stress tested. OSFI said they are exempt because their credit risk has been transferred for the life of the loan to the mortgage insurer, which pays the lender if the borrower defaults on monthly payments.
OSFI has been rolling out proposals and consultation papers to further strengthen banks, which already face the most stringent rules amongst lenders. The sharp rise in interest rates has exposed issues with popular mortgage products.rule proposals were unveiled in January. At the time, OSFI had asked whether an amortization limit should be used to qualify for a mortgage with the aim of curtailing excessive leverage.
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