Ottawa aims to head off looming mortgage cliff with relief for borrowers

The federal government takes measures to help Canadians cope with the rising cost of housing and the looming mortgage cliff, which could affect more than two million home loans that will be renewed at higher interest rates in the next two years.

The federal government takes measures to help Canadians cope with the rising cost of housing and the looming mortgage cliff, which could affect more than two million home loans that will be renewed at higher interest rates in the next two years.

The government announced a new Canadian mortgage charter that requires lenders to offer relief options to borrowers who are facing financial hardship due to the pandemic or other circumstances. The government also announced that it will allow some borrowers to switch lenders without having to undergo a mortgage stress test, which will increase competition and flexibility in the mortgage market.

The mortgage cliff is a result of the surge in home prices and demand during the pandemic, which led many Canadians to take advantage of low interest rates and buy or refinance their homes. However, as the Bank of Canada has started to raise its key interest rate to curb inflation, many borrowers will face higher payments when their mortgages come up for renewal.

The government hopes that the mortgage relief measures will ease the burden on borrowers and prevent a sharp decline in housing activity and consumer spending, which could have negative impacts on the economy and financial stability. The government also announced a range of initiatives to boost the supply and affordability of housing in Canada, such as providing low-cost financing for rental construction, creating a new affordable housing fund, cracking down on short-term rentals, and investing in co-operative housing development.