Decoding the New Canadian Mortgage Charter

Thursday Nov 23rd, 2023


Deputy Prime Minister and Finance Minister Chrystia Freeland recently emphasized the significance of the Canadian Mortgage Charter, introduced in the Fall Economic Statement, as a crucial development for Canadian borrowers.

This Charter, a product of the Liberal government's initiative, is designed to enhance the way financial institutions interact with borrowers, building upon the existing guidelines and expectations.

Freeland acknowledged the challenges faced by many Canadians due to rapidly increasing interest rates, affecting their mortgage payments and overall affordability of their homes. The Charter is a response to these concerns, offering support in these challenging times.

Key Elements of the Canadian Mortgage Charter:

  • Not a law, but a set of guidelines for banks, based on the Financial Consumer Agency of Canada's (FCAC) guidelines.
  • Six main guidelines focus on assisting 'vulnerable borrowers' under financial strain.
  • These include extending mortgage amortization periods, waiving certain fees, exempting insured mortgage holders from re-qualifying under stress tests at renewals, proactive communication from banks about mortgage renewals, options for lump sum payments, and waiving interest on interest for certain mortgage relief situations.

The Charter aims to consolidate existing measures and introduce new ones like proactive bank outreach and stress test exemptions for insured borrowers at renewal, making them more accessible to consumers.

The term 'vulnerable borrower' aligns with the FCAC's definition, focusing on those at risk of mortgage default due to severe financial stress.

Enforcement and Compliance:

  • The FCAC is responsible for investigating complaints against federally regulated financial institutions.
  • Complaints and findings are reported to Parliament, and the federal government monitors compliance with these relief measures.

In summary, the Canadian Mortgage Charter is a strategic framework aimed at supporting borrowers, especially those facing financial hardships, by clarifying and consolidating guidelines for financial institutions

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