In late March, Canada’s competition agency recommended that policymakers make it easier for mortgage holders facing a mortgage renewal.
Specifically, the Competition Bureau recommended regulators waive a “stress test” rule for uninsured mortgage borrowers who switch lenders.
“When consumers renew their mortgages, their ability to switch to a competitive mortgage offer is critical to ensure they obtain the best rate and terms to serve their needs,” the bureau’s report says.
Disappointingly, this week, the Office of the Superintendent of Financial Institutions rejected this recommendation. In so doing, it has missed an opportunity to help address two acute Canadian challenges: affordability and low productivity.
Some readers may recall that last fall Ottawa announced a new Canadian Mortgage Charter, ostensibly to provide relief to stretched borrowers. The announcement was more show than substance, since all of the measures either existed already or are optional for lenders.
But one of the charter measures that got significant attention was the promise that insured mortgage holders were not subject to a stress test requirement when switching lenders. As Canadian Affairs reported at the time, this measure did little to help most borrowers, since 73 per cent of Canadian mortgage holders are uninsured.
