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Mortgage Coming Up For Renewal - Don't Stress It

November 22, 2023

Homeowners fretting about paying more on their mortgages at renewal could soon have more power to shop around for a better rate, thanks to a package of housing affordability measures proposed in the Liberals’ fall economic statement.

Finance Minister Chrystia Freeland tabled the Liberals’ fiscal update in the House of Commons on Tuesday, November 21. The spending document came with a broad focus on affordability issues, and specifically on housing costs. One of the groups the Liberals targeted for relief is Canadians with mortgages, many of whom are gearing up to face higher monthly payments as they renew their loans in the modern higher-interest rate environment.

Ottawa is proposing to introduce a Canadian Mortgage Charter that will set expectations for how lenders interact with homeowners throughout the mortgage process. One of the proposals would see homeowners with an insured mortgage up for renewal not have to requalify at the minimum qualifying rate — colloquially called the stress test — if they’re switching lenders at the end of their term. Currently, this only applies if a homeowner were to renew their mortgage with their current institution. The stress test sees Canadians qualify for a mortgage at rates higher than what they’ll be paying as a buffer against interest rate hikes. Applicants are stress tested to see if they could make payments at rates of 5.25 percent or the contract rate on offer plus two percentage points — whichever is higher.

After the Bank of Canada rapidly raised its interest rates over the past year and a half, the need to requalify and pass the stress test has boxed many Canadians out of the chance to shop around for better rates. With the new charter, homeowners will be able to shop around to different institutions to secure the best rate for their renewal. This is a positive step forward for any homeowner looking to renew their mortgage over the foreseeable future, as rates are not expected to fluctuate significantly during 2024.

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