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CHBA Brief: Stress Test on Mortgages a Serious Concern

On Monday, October 3, federal Finance Minister Bill Morneau announced a series of proposed changes to federal policies and legislation affecting mortgage loan insurance, mortgage lending rules, and tax treatment of capital gains from principal residences for foreign buyers.  As details on the mortgage insurance and lending rules continue to emerge and there has been time to assess them, CHBA is very concerned about the impacts on potential homebuyers, particularly first-time homebuyers, and in turn on our industry and the economy.

Of particular concern is the “stress test” whereby all insured homebuyers must qualify for a mortgage at the Bank of Canada’s conventional five-year fixed posted rate, which is significantly higher than actual rates.  This will dramatically reduce the mortgage amounts available to buyers, locking out many first-time buyers trying to buy entry-level units, and potentially disqualifying buyers who have already qualified but not yet secured their mortgage.  Conventional mortgages will also be affected by new portfolio insurance rules, and this will further impact the market, although the extent of these impacts remains unclear (CHBA is  vigorously pursuing more definitive information from the Finance Department). CHBA commissioned a study on the impacts of the measures that estimates that one-third to one-quarter of first-time buyers could be removed from the market, and that the measures overall will reduce housing activity by 6 to 10 percent. This is obviously a serious concern.

Accordingly, CHBA has contacted the following in Federal Government leadership to raise our issues and serious concerns, and will follow up accordingly:

  • Minister of Finance (Morneau)
  • Parliamentary Secretary to the Minister of Finance (Champagne)
  • Minster responsible for housing and CMHC (Duclos)
  • President and CEO of CMHC (Siddall)
  • Chair of the Parlimentary Finance Committee (Easter)

We have been asked if members should contact local MPs: yes, they should certainly feel free to do so to express their concerns.  Hearing directly from constituents about concerns of this nature can be very effective in helping MPs convey the magnitude of concern around this type of measure.

CHBA has also engaged several other national organizations with interest in preserving the dream of homeownership for Canadians (like the Canadian Real Estate Association, Genworth, Canada Guaranty, and Mortgage Professionals Canada) about collaborating to address this issue and others emerging around homeownership.

Given the nature of this and other measures taken or being considered by the current government, CHBA will also be having a dedicated session on government relations related to these issues with Earnscliffe Strategy Group at the CHBA Board of Directors Meeting on October 27th.