Economists: Bet on more mortgage rule changes

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A new poll suggests economists are increasingly convinced the government will move to ratchet down mortgage rules in 2012 – that even as the broker channel ramps up lobbying efforts to block the move.

Some 10 of 14 economists and strategists surveyed for Reuter’s first poll on the Canadian housing sector last week said Ottawa does, indeed, seem poised to tighten mortgage rules within the next 12 months.

Moreover, they believe that intervention is likely to come as early as the busy spring season.

That opinion may be reflected in their projections for home prices this year, with respondents predicting a mere 0.1 percent climb for this year and again in 2013. That’s down from last year’s near-1 per cent price growth.

The poll results may only add to broker concerns that the federal government is planning to reduce the maximum amortization for CMHC-insured mortgages to 25 years instead of the current 30.

Brokers are already concerned that the CMHC has effectively moved to discourage lenders from growing their business-for-self portfolios.

Earlier this month, the Crown corporation warned lenders they’ll face increasingly limited access to bulk insurance for their conventional loans as the CMHC’s $600 billion fund comes within 10 per cent of its government-set ceiling. At the same time, documents from the Office of the Superintendent of Financial Institutions revealed the regulator’s concerns over mortgage lending for self-employeds and lender underwriting standards on those loans.

Economists polled by Reuters are suggesting more formal rule changes are in the works. Industry analysts are betting on that chop in the amortization cap and/or an increase in the cost of mortgage insurance.

CAAMP is now actively lobbying against any such move, with its CEO twice travelling to Ottawa this month to deliver that message to Finance committee members in person.

It has also crafted a new industry report documenting what could well be at stake with further tightening of the country’s mortgage rules --  detailing the economic impact of the housing and mortgage industry.

“We want the government to be aware of the economic and job contribution that housing and the real estate industry provide,” said CAAMP CEO Jim Murphy, coming off a second visit to Parliament Hill. ”CAAMP, based on current data and research, sees no need to further tighten or restrict access to residential mortgages at this time.”

The new report by CAAMP Chief Economist Will Dunning is bringing that point home by identifying all the ways that the Canadian housing sector is a significant economic driver.

Housing and mortgage activities, along, “could account for more than 1.35 million direct and indirect jobs about 8 per cent of total Canadian employment,” writes Dunning. “The housing and mortgage industry has been particularly important to job creation these past five years.”

The report estimates that from 2006 to 2011, 18 per cent of all job creation occurred as a direct and indirect result of growth in the housing and mortgage sector.

 

  • Daryl Woodill on 2012-02-23 5:44:53 AM

    It astounds me that it is the potential home-owners who are paying the price for increasing credit card debt. It is very obvious that the reason why the public's spending out of control is due to the amount of credit that banks and credit card companies thrust upon us! What the government needs to do is tighten up on qualifications for mortgage instead of shortening amortizations - mortgages should be qualified on available credit and not just credit balances. This would cut back significantly on credit card debt as people would start cancelling unused credit cards or not sign up for them at all! But the banks and credit card companies won't let that happen because they are making too much money off of our spending - and that my friends is how the cookie crumbles. Sad.

  • AB Broker on 2012-02-23 6:50:20 AM

    Daryl, I agree with you. Sadly, a person with a TDSR (total debt service ratio) of 50%, meaning 50% of their income is going to service those debts, yet the vehicle finance companies will extend more credit to facilitate the purchase of a new car. This is CRAZY!!

    I had a couple on Sunday with 20 credit cards between the two of them, $80+K total, not including the vehicle finance and two student loans. That is more than their combined annual salaries! My suggestion was to sell the home, take the 10% equity and payout the cards and rent. Their response, we don't want to go back to renting. What?? It's better than the alternative!!

    Can't fix stupid!

    I'm happy to hear that CAAMP is out there speaking on behalf of their membership!! Keep it up.

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