Two Canadian banks have taken the first step in addressing red-hot housing activity in Vancouver and Toronto by implementing tighter requirements on mortgage applications.
The regulatory changes came amid increasing concerns over the alleged effect of non-resident home buyers on Canadian residential real estate prices, The Globe and Mail
Bank of Nova Scotia
recently terminated its “pilot program” that allowed clients who have made large down payments to skip income verification procedures.
Meanwhile, effective immediately, the Bank of Montreal will be requiring all mortgage applicants to present documents that validate their level of wealth and their source of income.
Stricter bank rules have long been discussed as a possible moderating influence on Canadian home price growth, which many quarters have blamed on overseas investors. In B.C. alone, data from provincial authorities showed that more than $1 billion has been poured by foreign nationals on real estate investment (mainly in Vancouver) from June 10 to July 14.
Exemptions from mortgage application requirements should solely cover financially struggling buyers, according to a real estate attorney.
“It really should be for a true benefit for new immigrants who really can't afford it, not for those who are taking the advantage to buy a more expensive home and simply leverage their money,” White Rock lawyer Tejinder Dhillon said.