As someone who’s been following the ups and downs of Canada’s mortgage landscape, I was intrigued by OSFI’s recent announcement about easing the stress test for uninsured mortgage switchers. On the surface, it sounds like a win for homeowners struggling with rising rates, but the more I dug into the details, the more I realized there’s a lot more going on here than meets the eye.
Here’s my take on what this change really means for borrowers like you and me.
What’s the Big News?
OSFI has removed the federal mortgage stress test requirement for borrowers switching uninsured mortgages between federally regulated lenders. The goal? To give homeowners more freedom to find better deals without feeling locked into their current lender.
Sounds great, right? But there’s a catch. Actually, there are quite a few catches.
For starters, the exemption only applies if:
You’re switching between federally regulated financial institutions (FRFIs).
You’re not increasing your mortgage balance.
The remaining amortization period stays the same.
If all these conditions are met, you’re free to switch without facing the stress test. It’s a step forward, but it’s far from a game-changer.
Who Can Actually Benefit?
While OSFI’s intention to create more competition is commendable, the policy comes with significant limitations that restrict who can take advantage of it.
Switches Between Banks: If you’re moving your mortgage between two federally regulated banks, you’re good to go.
Credit Union Borrowers: If your mortgage is with a credit union (such as Meridian, Duca, First Ontario CU ) or a mortgage finance company (MFC) such as First National, MACP, RMG, CMLS, Equitable Bank or Strive, you’re out of luck. Switching to a federally regulated lender still requires passing the stress test.
Switches to Non-Bank Lenders: Even if your mortgage was originally funded by a federally regulated bank but held by a credit union or MFC, you’ll likely face the stress test if you try to move it back to a bank.
In practical terms, this means many homeowners won’t see any real change in their options. If anything, this policy could solidify the hold credit unions and MFCs have on their customers, limiting the competition OSFI claims to encourage.
Mid-Term Switchers Are Left in the Cold
One of the most frustrating aspects of this policy is that it excludes mid-term switches. If you’re in the middle of your mortgage term and struggling with high payments, you’ll still need to wait until renewal to find a better deal—assuming you qualify then.
This feels like a missed opportunity. Properly underwritten mid-term switches don’t add significant risk for lenders, so why not give borrowers the flexibility to seek relief when they need it most?
What Lenders Are Doing
Interestingly, not all lenders are ready to embrace this change. While some banks are gearing up to allow stress-test-free switches, others are dealing with system delays, meaning it could take weeks before these policies are fully implemented.
On the bright side, some banks are offering to roll up to $3,000 in closing costs into the mortgage for non-stress-tested switchers. It’s a small but helpful gesture for homeowners trying to manage their finances.
What Does This Mean for Borrowers?
For those of us watching this unfold, the implications are mixed.
More Freedom, But Only for Some: If you’re already with a federally regulated lender, this change could open up better options at renewal. But if you’re with a credit union or MFC, you might feel even more trapped.
Limited Competition: The restrictions on non-bank lenders mean the playing field is still uneven. Borrowers with unconventional lending arrangements or higher debt ratios won’t see much benefit here.
Missed Opportunities for Mid-Term Borrowers: OSFI had a chance to help borrowers struggling mid-term, but they fell short.
My Take
While I appreciate the intent behind this policy, it feels half-baked. Borrowers with federally regulated lenders might find a little more flexibility at renewal, but the restrictions on credit unions, MFCs, and mid-term switches leave many homeowners in the lurch.
Competition is a good thing, and we need more of it in the mortgage market. But for that to happen, OSFI needs to level the playing field, especially for borrowers at non-bank lenders who are often left out of these discussions.
For now, my advice to homeowners is to stay informed. Know your options, ask your lender the tough questions, and don’t assume this policy will automatically improve your situation.
As OSFI rolls out more details—particularly at their "Industry Day" on December 5—I’ll be keeping a close eye on how this plays out. I’m hopeful we’ll see further refinements to address these gaps, but until then, borrowers should proceed with caution.
This is how I see it. What about you? Have these changes made you rethink your mortgage plans? —I’d love to hear your thoughts.