Because you're moving from a single degree into a double degree, I don't think it comes under an internal transfer and you may have to go through UAC at the end of the year. If you choose this, you can get all subjects you do count towards the degree so you won't have wasted any time at all. And if you go through UAC, you don't need amazing marks. (anything credit average would be more than fine)
It is definitely possible to make psych your arts major if you do that!
Also keep in mind that if you want to do some arts subjects, you have up to 48credits worth of electives as part of the science degree, so you can use some of them on artsy subjects.