Canada’s banking regulator says it has no plans to remove the stress test on uninsured mortgages for borrowers who choose to switch lenders.
The Office of the Superintendent of Financial Institutions (OSFI) made the statement to to CMT in response to recommendations released by the Competition Bureau on Thursday, which included advocating for the remove of this stress test requirement.
The current regulation exempts borrowers with default-insured mortgages—typically those who have made a down payment of less than 20%—from needing to undergo the stress test when switching lenders. OSFI explains that insured mortgages present a lower risk to financial institutions since the credit risk is assumed by default insurers, not the lenders themselves.
“When an uninsured borrower switches lenders, the new lender takes on the credit risk of that…
