Canada's banking regulator has announced that it will no longer require borrowers with uninsured mortgages to undergo a stress test when switching lenders at renewal. The Office of the Superintendent of Financial Institutions (OSFI) stated that mortgage providers will no longer need to apply the minimum qualifying rate if a borrower keeps the same loan amount and amortization schedule when transferring from one lender to another.

This policy change addresses long-standing concerns in the mortgage industry, where it was seen as a deterrent for homeowners wanting to explore other lenders at renewal. OSFI acknowledged the "imbalance" between insured and uninsured mortgage renewals and noted that while the stress test was originally introduced to mitigate certain risks, those risks have not materialized.

This decision is part of a broader set of changes to Canada's mortgage regulations. Last week, the federal government raised the cap on insured mortgages to $1.5 million and allowed 30-year amortizations for first-time homebuyers and those purchasing newly built homes.

Lauren van den Berg, president and CEO of Mortgage Professionals Canada (MPC), called the removal of the stress test a "significant win" for Canadians, as it will enable borrowers to access better rates and more options at renewal.

OSFI plans to officially announce the new policy in its next quarterly release on November 21. Earlier this year, OSFI Superintendent Peter Routledge acknowledged concerns raised by the Competition Bureau, which argued that the stress test was limiting competition among lenders and preventing Canadians from securing the best deals.

This marks a notable shift for the regulator, as Routledge had previously suggested that changing the rule was unlikely. However, OSFI is now working with financial institutions to ensure a smooth transition to the new policy.