The mortgage landscape is constantly evolving, and recent updates bring significant opportunities and considerations for homeowners and prospective buyers. To keep you informed, here’s a summary of the latest changes and what to expect in the coming weeks.
November 21st - Stress Test on Mortgage Switches Eliminated
The federal banking regulator (OSFI) has removed the stress test requirement for simple mortgage switches when transferring from one lender to another. This is a welcome change for borrowers looking for better rates or service with minimal hassle.
What does this mean for you?
If you're switching your mortgage at the end of its term, you’ll no longer have to qualify under the stress test, simplifying the process and potentially giving you more flexibility in choosing a new lender.
Most lenders will cover the legal costs of transferring your mortgage, so the process is nearly cost-free, aside from a small discharge fee. This fee can often be rolled into your new mortgage.
It’s important to note that lenders do not typically cover the penalty for breaking your current mortgage mid-term, so you’ll want to ensure the timing is right before making the switch.
While the stress test is removed, new lenders will still require verification of your employment and ability to service the loan, so be prepared to provide documentation.
This change lowers the barriers for homeowners seeking to secure better terms, fostering competition among lenders.
December 11th - The Next Bank of Canada Rate Announcement
Mark your calendar for the next Bank of Canada announcement, as it could bring some relief to mortgage holders.
What’s the outlook?
Analysts are anticipating at least a 0.25% rate cut, with some even speculating a 0.50% reduction.
This is promising news for variable-rate mortgage holders who have faced financial strain during the recent period of rising interest rates. Lower rates will ease monthly payments and provide some breathing room.
That said, fixed mortgage rates continue to sit lower than variable rates and are expected to remain more attractive in the short term, even after a rate cut or two.
Should you switch from a variable to a fixed rate?
If you’re considering locking into a fixed rate, you might want to hold off for now. Fixed rates still have room to drop, and patience could save you money in the long run. Every situation is unique, so it’s always a good idea to review your options with a mortgage professional.
December 15th - 30-Year Amortizations for First-Time Buyers
Starting December 15th, insured mortgages for first-time buyers will allow a 30-year amortization, an extension from the current 25-year limit.
Key details:
This change applies only to insured mortgage purchases through CMHC, meaning buyers need less than a 20% down payment.
By extending the repayment period, monthly payments become more manageable, offering increased affordability and buying power for young or first-time homebuyers.
Pros and cons:
The lower monthly payment can make homeownership more accessible for buyers struggling with affordability in today’s market.
However, it’s worth noting that a longer amortization means paying more interest over the life of the mortgage.
As a real estate professional, I see this as a positive step for helping more young Canadians enter the housing market, especially in high-demand areas where affordability remains a challenge.
Breakdown:
For a Home Priced at $1 Million
5% Down payment ($25k) for the first $500k
10% Down payment ($50k) for the remaining $500k
Total down paymentL $75k
For Homes Priced at $1.499 Million
5% Down payment ($25k) for the first $500k
10% Down payment ($99.9k) for the remaining $999k
Total Downpayment $124.9k
Why These Updates Matter
These recent changes reflect a shifting mortgage environment designed to address some of the affordability and accessibility challenges Canadians face. Whether you're looking to switch lenders, considering locking in a fixed rate, or exploring homeownership as a first-time buyer, there are opportunities to leverage these updates to your advantage.
If you have questions about how these changes impact your unique situation or want guidance on your next steps, don’t hesitate to reach out. Staying informed is the first step toward making confident, informed decisions about your mortgage and financial future.