Ottawa says the move will empower homeowners in face of higher mortgage renewals
The federal government unveiled the Canadian Mortgage Charter last month, in an effort to make it easier for homeowners worried about higher mortgage renewals to shop around for better rates.
The initiative was part of a package of housing affordability measures proposed during last month’s fall economic statement. Ottawa is proposing a Canadian Mortgage Charter that it says will guide homeowners and set expectations for lenders during the mortgage process.
“Our goal is to make sure Canadians have the support they need to afford their mortgages and keep their homes when renewing at a time of higher rates,” said Finance Minister Christie Freeland.
Currently, the stress test mandates Canadians to qualify for a mortgage at rates surpassing their expected payments serving as a precautionary measure against potential interest rate hikes.
However, under the charter, homeowners with an insured mortgage facing renewal may be exempt from re-qualifying at the stress test rate when switching lenders at the end of their term. The move could push lenders to to fight harder to hold on to a homeowners’ mortgage, creating more competition.
The charter also seeks to extend the amortization period temporarily for mortgage holders and mandates banks to notify homeowners four to six month before mortgage renewal so they have time to prepare and consider their affordability options.
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