Past bids to cool hot housing markets through mortgage rule tweaking hasn’t worked, according to one economist who suggests the government may look to further tighten the rules.
“I wouldn’t be surprised. Keep in mind they started this process in July of 2012 and that was the first change,” Michael Campbell, economist for mortgage network Verico, told REP. “So now we have this change here and yet it hasn’t started to slow down the hot markets at all.”
Campbell is referencing the latest mortgage tweak to high ratio mortgages that went into effect February 15.
The minimum down payment for new insured mortgages increased from 5% to 10% for the portion of the house price above $500,000.
The changes were meant to reduce taxpayer exposure while supporting long-term stability of the housing market, according to the ministry.
And while many predicted the change would impact the hot Vancouver and Toronto markets, Campbell argues it hasn’t.
“We didn’t see any change in the market; the market just completely exploded after that,” Campbell said. “In Vancouver, in Victoria, in Toronto – the hot markets stayed hot.”
Because of this, the government may look to implement even further tightening. But would that be the right move? After all, real estate has been a major driver of – what is, at this point a struggling – economy.
“You have to ask why you want to cool the market first,” Campbell said. “Every homeowner is pretty happy right now, but there are other things too; the renovation industry is thrilled, the furniture selling industry is thrilled, painters are thrilled.”
Your clients may soon have a more difficult time qualifying for a home, according to one leading economist.