Ottawa loosens mortgage stress test in housing-focused fall fiscal update

The fall economic statement proposed a new Canadian Mortgage Charter to set expectations for homeowners' interactions with federal lenders.

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. 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 are Canadians with mortgages, many of who 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.

“Our goal is to help Canadians through an incredibly challenging time by making sure Canadians have the support they need to afford their homes when renewing at a time of higher interest rates,” Freeland said in the House of Commons Tuesday.

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.

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 per cent or the contract rate on offer plus two percentage points — whichever is higher.

Those with mortgages up for renewal don’t have to pass the stress test to re-up with their existing lender — they only have to clear that bar if they’re looking to change to another federally regulated institution.