Canada’s federal government should consider easing on the B-20 regulations, which mandated considerably stricter mortgage borrowing stress tests, introduced earlier this year.
The Canadian Home Builders’ Association argued that the rules are now doing more harm than good to the market, especially to millennials and struggling markets like Calgary.
“Ideally at this point the best thing would be for the new stress test to be repealed, just removed,” CHBA director of communications David Foster told Bloomberg. “Markets like Calgary, they’re already quite soft, are just hammered by this.”
Mattamy Homes Canada CEO Brad Carr agreed that the tighter rules have already done their part in moderating housing markets, especially in (arguably) Canada’s hottest market: In April, the average home sales price in Toronto fell by 12% year-over-year, and has stabilized around that lower level since then.
“We’re going to continue to lobby for a pullback now on B-20,” he said. “That had a very targeted outcome. It’s been achieved so it’s kind of overkill now.”
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As rates rise, “they’re doing their natural job and that 2% spread, we certainly hope the government will either remove it or at least cap it,” Carr noted, referring to the spread above the contracted rate which all borrowers are required to prove that they can repay.
Mattamy Homes founder and CEO Peter Gilgan noted that bringing this spread down to 1.5% or 1% would make the most sense in current market conditions.
“We’re right in the midst of a soft landing, certainly something that we predicted and actually helped influence,” Carr added. “It was necessary. The market here was running a little hotter than we thought it should for the long-term health of the market place.”