New mortgage rules really help out

by Shawn Lackie

For those of us who carry a mortgage, the news released by OSFI (Office of the Superintendent of Financial Institutions) a few weeks ago was indeed welcome information. Effective November 21st of this year the governing rules for mortgages will change.

Traditionally, when you sign mortgage documents, you were pretty much indentured to the financial institution you dealt with. Even though you may not have agreed with their rates, terms or business practices, you were pretty much tied to them for the duration of your agreement. That was mainly because, if you did want to change lenders, you had to go through the rather stringent stress test. It was like qualifying all over again. For many, whose lives and work situations had changed since their first mortgage, this became a possible pitfall. If you wanted to re-up, you just signed on the dotted line with the institution you originally signed with.

A few years ago, we went through that and were most definitely not impressed with the service and the lack of ability to negotiate a better rate. I won’t name names, but they were pretty inefficient and smug to boot. It was pretty much take it or leave it. They had leverage, we didn’t, so we had to re-up no questions asked. Now the landscape looks a little different. I am certainly not an expert on this matter and don’t claim to be, so I sought out some clarification from someone who is an expert.

Brad Vokins is a mortgage broker/specialist for Dominion Lending Centres, in Port Perry. Brad has been in the mortgage business for 17 years, in the financial services business for 25 years and is one of the best in the region. Here is his take on the latest developments:

“Effective November 21st, 2024, OSFI has removed the requirements of lenders to apply the stress test, to straight switches of uninsured mortgages. The Stress test was introduced in January of 2018 and it required borrowers to qualify at the higher of the Bank of Canada’s five year benchmark rate or the contract rate plus 2 percent. This change will make it easier for borrowers to switch lenders at renewal, without having to prove they can afford their mortgage at a higher rate. The borrower can then shop around for the best rate or product which will best suit their financial needs, giving them more choices and flexibility. On a straight renewal, the current lender will not ask you to re-qualify and you would just need to sign the renewal documents for your current mortgage. However, the new lenders will still need to make sure you can qualify for this new mortgage and will need to fully underwrite the mortgage. This will also create competition with other lenders, leading to more competitive rates being offered up front.”

This is great news for the consumer and that is what matters most. The people footing the bill 'now' have options, and will explore them.