Not materially, it turns out.
“(The mortgage rules) can certainly have an impact, it’s not in our baseline outlook because those mortgage rule changes were announced after our forecast was finalized,” Bob Dugan, chief economist with CMHC, told reporters during a conference call Wednesday. “We actually looked at that in terms of alternative scenarios to see whether potential impact of the mortgage rule changes would lie within our forecast ranges and we concluded they do.”
The Canada Mortgage and Housing Corporation released its fourth quarter Housing Market Assessment Wednesday, which found most Canadian markets are overvalued and that price growth is expected to slow through 2018.
CMHC concluded overvaluation and overbuilding in many markets will contribute to slower price growth and moderated housing starts over the next two years.
Since the report was finalized prior to the announcement of October’s mortgage rule changes, the potential impact of those was not worked into the Crown Corporation’s assessment.
However, Dugan believes the changes will cause sales, prices, and starts to trend slightly lower than previously believed.
“So what we’ve done is we’ve kind of looked at our own data on mortgage insurance to sort of see, looking backwards over recent applications, how might that affect approvals of mortgages on applications we’ve already received,” he said. “We’ve come to the conclusion … taking that information with the fact that mortgage insurance accounts for about 30% of the flow of loans, we’ve come up with an estimate that about 5-10% of mortgages would be affected by the policy changes.”
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The Crown Corporation finalized its latest forecast prior to the announcement of the recent mortgage rule changes – but would those changes have altered its outlook?