The Canadian Home Builders Association, Mortgage Professionals Canada, and the Ontario Real Estate Association are calling for amendments to the B-20 mortgage rules that slapped a 200 basis point stress test on mortgages.
But the CEO of the Canada Mortgage and Housing Corporation is pressuring the government to stay the course, citing potential for a damaged economy.
``My job is to advise you against this reckless myopia and protect our economy from potentially tragic consequences,'' CMHC’s President and CEO Evan Siddall wrote in a letter to the Standing Committee on Finance.
But according to mortgage broker and Managing Partner of Tribe Financial, Frances Hinojosa, the time has come to readjust the rules, like reducing the stress test by 1.25%, or even extending amortizations on insured mortgages to 30 years.
“Seventy-five basis points is feasible,” said Hinojosa. “I don’t expect to see policymakers turn around and return things to the way they were, but they should at least be cognizant of the landscape and how consumers qualify with mortgages. When they set up those rules they were assuming that interest rates would be on an upward trajectory, but that isn’t the case anymore. Qualifying clients 2% above contract rate is pretty aggressive, so let’s amend the stress test to something rational that’s based on the current interest rate predictions.”
Sage Real Estate Ltd. team lead Christine Cowern says another solution is for banks to lower loan-to-values on mortgages, and added that Siddall is overreacting.
“The head of CMHC is being a little dramatic in his defence of B-20,” she said. “As a realtor who has a team that works in the business seven days a week, we’ve witnessed clients spiral downward with regards to their purchasing abilities. I fail to see how making homeownership more difficult for Canadians does anybody any favours.”
Further complicating the situation for Torontonians, in particular, is that rentals have grown financially proscriptive, leaving residents of Canada’s largest city with limited options.
“We’re trying to increase rental supply but the cost is still too high for most people to afford these days,” said Cowern. “If we can’t afford to buy a home or to rent a home, people aren’t going to have anywhere to live.”