Struggling mortgage holders could see lenders waive fees under new guidelines

globalnews.ca:

Ottawa has published a new set of guidelines to standardize how Canada’s federally regulated lenders offer mortgage relief to consumers struggling under the weight of higher interest rates.

The new approach could save some mortgage holders on costly fees and penalties that come with refinancing, paying lump sums or otherwise altering the terms of their loans.

The guide published Wednesday from the Financial Consumer Agency of Canada seeks to alleviate the burden for homeowners and other mortgage holders with variable rates or those renewing their fixed-rate terms.

These mortgage holders have, in many cases, seen their monthly payments soar over the past year as the Bank of Canada raised interest rates by 4.5 percentage points since March 2022.

Variable rate mortgage holders have either seen their payments rise in lockstep with the central bank policy rate or seen their amortizations extended as more of their monthly payments go towards paying down rising interest.

Some homeowners who took out fixed-rate mortgages when rates were low during the COVID-19 pandemic, meanwhile, are today renewing into much higher interest rates and facing substantial jumps in their monthly payments.

The FCAC guide focuses on individuals who are at risk of defaulting on their mortgage as a result of higher payments in combination with a rising cost of living.

Banks and other lenders will sometimes offer various forms of relief for consumers struggling in these scenarios, but the FCAC’s new guidelines seek to standardize the approach from federally regulated institutions. The agency notes it cannot prescribe direct action that institutions should take, but has set expectations for what the lenders should consider in such circumstances.

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