This week, OSFI (Canada’s banking regulator) announced an important and sensible adjustment to the mortgage renewal process:

No More Stress Test at Renewal.

Before anyone jumps to conclusions like, “Isn’t that risky?”, let’s break down how mortgage renewals work in Canada:

• Most Canadian residential mortgages are structured as short-term agreements. Over 95% of all mortgages fall within 1-to-5-year terms.
• Because of these short terms, renewing your mortgage with your current lender is usually automatic. There’s no re-underwriting involved.
• When it’s time to renew, borrowers typically receive a renewal letter from their lender offering rates for different term options. The borrower simply picks one—no additional financial scrutiny is required.
• In fact, the current lender doesn’t even check if the borrower is still employed.

Now, if borrowers want to shop around for a better rate, that’s a different story. They have to go through the hassle of providing updated proof of income. Until now, they also had to pass a stress test—a requirement that felt unnecessary and inconsistent, given the lack of income verification from the existing lender during renewal.

This is what has changed.

This change is a huge win for the 12%–15% of borrowers who previously couldn’t shop for better rates because of the Stress Test. Shopping around is critical, especially in today’s environment where almost every renewing borrower is facing higher rates. Now, borrowers have a real opportunity to seek out and secure the most competitive deal available to them.

Why was this necessary?

For five years, OSFI insisted it was dangerous not to Stress Test mortgage renewals—even though they were well aware that lenders didn’t verify income during the renewal process. This inconsistency made the Stress Test a roadblock for borrowers looking to improve their terms.

Interestingly, it wasn’t OSFI but the Department of Finance that pushed for this sensible policy change, finally addressing the gap.

Why did OSFI resist this for so long? That’s a question worth pondering. But for now, let’s celebrate the fact that a flawed policy has been corrected, making the mortgage renewal process fairer and more consumer-friendly.

In a market like today’s, where every percentage point matters, this change empowers borrowers to make better financial decisions and secure the best possible rates. We may be back on track to an era of good mortgage policy.