The change should also have applied to non-federally regulated lenders, according to a top non-bank CEO
A decision to axe stress test requirements for uninsured mortgage renewal switches to a new lender came into effect last week – but the change should have been applied to a wider swathe of lenders than just federally regulated institutions, according to a non-bank CEO.
Ron Swift (pictured), of Radius Financial, told Canadian Mortgage Professional that the move was a positive one in bringing greater choice to borrowers and competition for the mortgage market, although it was “not perfect news” for the whole industry because non-federally regulated entities, such as mortgage finance corporations and credit unions, were not included.
“The bigger opportunity for us non-banks was the opportunity of potentially getting customers from the banks to switch to us. At this point, we’ll still have to stress test them,” he said.
Still, Swift views the adjustment as a positive step. “It is good news for the consumers out there. It’ll help bring better rates, better performance, and it’ll help keep the market more stable and more competitive.”
The Office of the Superintendent of Financial Institutions (OSFI), Canada’s banking regulator, changed its stance on uninsured mortgage switches after previously holding firm on the need to stress test when moving from one lender to another.
Swift said the regulator should give serious consideration in the future to nixing the requirement to meet a qualifying rate of 5.25%, or the contract rate plus 2%, whichever is higher, when switching to a non-bank lender.
“I just think that we need to continue to figure out why the other lenders couldn’t have the same rules applied to us,” he said, “given almost all of us underwrite to the OSFI criteria to start with.
“It doesn’t quite make sense to me that if it’s been underwritten the first time around from a bank and [a customer] wants to transfer that into me, why would they have to do a stress test – and vice versa, why would someone who’s taking a loan from me need to stress test it again when we did it already the first time around, just like the banks did?”
How will recent government rule changes impact the mortgage market?
The move was the latest in a flurry of recent measures introduced by the government in an effort to ease some of the burdens facing mortgage holders and hopeful buyers, with two further policy adjustments – a hike of the insured mortgage cap to $1.5 million and rollout of 30-year amortization periods for first-time buyers – also set to arrive in the weeks ahead.
Those are more positive signs for buyers, Swift said, with the option to add a secondary suite to properties through an insured refinance with a maximum property value of $2 million likely to be “somewhat” helpful.
Affordability challenges will remain for many would-be homebuyers, but the measures combined should make a difference in helping boost activity in Canada’s housing market. “All these little real changes, when you add them all together, I think will add 10% to 20% more activity next year in the marketplace,” Swift said.
“That’s positive news for mortgage brokers. That’s positive news for lenders. And it’s really positive news for consumers because it means more people are in there buying and selling homes, which is a good thing.”
Canada's housing market is poised for a rebound in 2025, with RE/MAX Canada predicting a 5% rise in national average home prices and increased sales in 33 of 37 surveyed regions.https://t.co/dKY7kvqo4r#CanadianHousing #RealEstateTrends
— Canadian Mortgage Professional Magazine (@CMPmagazine) November 27, 2024
What mortgage professionals should keep in mind as 2025 nears
The spate of new rule changes arrives with the Bank of Canada firmly in rate-cutting mode, although US president-elect Donald Trump’s threat this week to impose tariffs on Canada in January has also clouded the economic outlook for 2025.
Swift emphasized the importance of brokers keeping a close eye on those developments and their possible impact on the mortgage market. “It’s just so imperative for mortgage brokers to stay on top of all this news, try and digest it and reach out to your various lenders or other people to try and understand the impact of these things,” he said, “so you can truly help your consumers on what it means to them.
“It’s just so important that brokers try to stay on top of that as much as they can, to provide consumers the right advice for the right time and then hopefully, together will all the positive news that’s coming out, we can help absorb any of the negative stuff and keep moving the market forward.”
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