Tougher lending standards coming?

by Justin da Rosa11 Mar 2016
Your clients may soon have a more difficult time qualifying for a home, according to one leading economist.

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.”


  • by Maxy 3/11/2016 12:54:45 PM

    True measures so far had not cooled the markets in those three jurisdictions to any recognizable degree. The government is however doing what a responsible government should do - watch trends, express concerns, do something. If first attempt at fixing the problem is ineffective, try something else without taking an over bearing measure that could turn things on their heads. If things turn too squeaky then we will have two problems - what a detergent ad categorizes as "double trouble". No solution in real estate industry is simple.

  • by 3/11/2016 2:26:25 PM

    Housing markets for me are very elastic. I mean, this market may highly respond to a hick in interest rates, or affordability, just to mention some causes for elasticity. Canadians as well as US buyers of houses rely much on what the current administration will do to help or not in their purchase. I'd like that to change to "ability to repay the lien (mortgage)". If this would be sustainable we would not have to worry, unfortunately is not. I still oppose to housing prices climbing up due to more demand (which could be manipulated)

  • by nick 3/11/2016 8:57:40 PM

    The government is not tackling the real problem. If the government did the proper research they would find that many of these high end buyers are indeed foreign and don't require mortgages. Tightening the mortgage rules does nothing to cash buyers.

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