Canadians brace for more changes to the mortgage market. The dust has not settled yet on the last changes put in place to the Canadian mortgage market and the government has already indicated that further changes might be in order.
In June of 2017, the Bank of Canada put out its semi-annual Financial Systems Review. The review is forecasting some major risks in Canada’s economic horizon. The BoC report identified that Canadians debt loads are increasing to an alarming level and that Toronto and Vancouver real estate markets are major vulnerabilities to the financial economic system in Canada.
My self and other Mortgage Professionals in Canada have recently been asked for our opinion as to whether or not the government should impose the stress test on all mortgages that are being provided to Canadians. The resounding voice of all the people questioned is NO do not make changes to the current rules. It remains to be seen if the government will actually listen to the men and women that are in the trenches or if they will unilaterally decide what will happen and make changes that can potentially destroy this already fragile sector. CMHC is reporting a decline in the number of CMHC backed mortgages to the tune of about 33% most lenders in the industry are as well reporting decreases of 30%-40% in the number of transactions that are being originated. You can read more about the changes that were last year in this blog post.
When the stress test was put in place last year, it hit the mortgage market hard. The average Canadians buying power dropped by over $100k. The impact of this change is huge, average Canadians can no longer afford homes priced over $450k this has driven prices of less-desirables homes up to keep up with the growing demand of the shrinking buying power of first time home owners.
As well it is believed that OSFI will begin a public consultation shortly on whether or not it should make changes to its B-20 Underwriting guidelines.
I believe that further modifications to the mortgage rules will cause an already delicate industry to collapse. The government should stop thinking about how to destroy industries and rather how to support them. They should be looking at creating jobs, lowering taxes and deploying it’s financial resources properly.