‘We welcome the new Financial Consumer Agency of Canada (FCAC) mortgage loans guideline for federally regulated financial institutions as a step to help protect homeowners facing mortgage default with interest rates at historic highs.
Canadian financial institutions and lenders have already shown flexibility for vulnerable mortgage consumers given the current exceptional economic circumstances. This has included temporary extension to amortization periods and waiving internal fees and costs on relief measures.
According to the Bank of Canada, over a million Canadians will have mortgages renewing this year, with the bank saying that “households are at greater financial risk at the time of renewal.” Given the rapid rise in interest rates from the near record lows many mortgage holders initially took out their mortgage or renewed most recently, homeowners coming up for renewal will likely have less options to move lenders.
To help keep the dream of homeownership alive for Canadians, the federal government can also waive the stress test on mortgages that have already been stress tested when they are being transferred, renewed, or switched, if there is no increase in the principal or terms other than the rate. This would help consumers service their debts by finding a more competitive rate at renewal and allow greater consumer choice, driving more affordability and competition among lenders.
Similarly, we recommend that mortgages switched between properties should not be stress tested, provided there is no increase in the principal. These measures would ensure Canadians are able to find the mortgage rate and products that best suit their needs.
More can be done to help Canadians in the face of the current housing affordability crisis. With many economists forecasting another interest rate hike from the Bank of Canada next week, further steps should be taken by government to protect borrowers.’
Lauren van den Berg, President & CEO, Mortgage Professionals Canada
