Whoa! says one mono-line exec arguing against additional mortgage rule changes: Today’s “irrational pricing environment” means the government simply hasn’t had time to assess the impact of changes already made.
“What we’ve been experiencing is an artificial market because of the low interest rates and irrational pricing,” Jason Kay, Merix’s VP of sales and corporate development, tells MortgageBrokerNews.ca. “What the government needs to do is wait for the return of a more normalized rate environment to assess the impact of the changes already made, rather than introduce additional changes."
Kay is among the first mono-line execs to publicly join the chorus of brokers concerned Finance Minister Jim Flaherty will use this month’s budget announcement to introduce a more stringent regime.
On the blotter, say analysts, is anything from lowering the amortization ceiling to 25 years, increasing down-payment requirements to as much as 10 per cent and hiking the cost of mortgage insurance.
Bringing in any of those changes may have only a modest impact on rising levels of household debt given current interest rates on both the fixed and variable side, argue brokers. They also point to a spike in unsecured credit as the real driver of debt levels.
Like Kay, they point to the modest impact changes already ushered in over the last two year have had, including an earlier chop to the amortization cap and the government’s move to peg mortgage qualification to the five-year posted rate.
Those changes would likely have had a pronounced effect on the market outside of the current interest rate environment, suggests Kay.
Any rush to further tighten rules without first allowing rates to return to a more historical range could unfairly saddle the mortgage industry, and the consumers its serves, with long-term consequences stretching well beyond the stop-gap measures the government may be looking for.
“It takes three minutes to make changes and three years to change those rules back,” Kay says.