Finance Minister Bill Morneau has admitted last year’s mortgage rule changes aimed at cooling the housing market have had the intended effect.
“Preliminary data received since the government implemented its most recent adjustments to mortgage rules in October, 2016, suggests that the rule changes are having their intended effect,” Morneau said in a letter to the finance committee, per the Globe and Mail. “A decline in the share of new insured loans issued to highly-indebted borrowers suggests that the quality of credit is improving in the high-ratio mortgage market.
“This development helps to ensure that Canadians are taking on mortgages that they can afford.”
Indeed, a recent report from TransUnion suggested mortgage originations have been impacted by last year’s rules, which included a mortgage stress test.
The agency reported a 10.4% decline in origination volumes in Q1 2017 compared to Q1 2016.
That included a 12% drop in prime mortgages and a 5% decline for “super” prime consumers.
“Recent new regulations in Ontario appear to have had an impact on the volume of home sales and, consequently, mortgage demand,” Fabian said. “So while the number of mortgages is increasing, it is doing so at a slower rate than last year.”
The same report also found serious delinquencies (60 days or more past due) dropped four basis points to 0.56%.
“Home values continue to rise compared to the previous year, pushing overall mortgage debt levels up. However, we did observe an easing of this trend in the second quarter from the previous quarter,” Matt Fabian, director of research and industry analysis for TransUnion Canada, said in the report. “Despite increases in mortgage debt, serious delinquency rates remain low with very little volatility observed over the past two years. Consumers have so far been able to manage their mortgage obligations despite the increasing balance levels. We will continue to monitor these trends especially as interest rates rise, though we don’t anticipate a material impact on mortgages in the near term.”
The drop in serious delinquencies marks the third consecutive quarter of declines.