RateHub.ca report: Cooling not collapse

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Brokers, consider it one last kick at the can or one last plea for the government to leave mortgage rules unchanged in Thursday’s budget. But new research is drawing more distinctions than similarities between Canada’s correction-ready housing market and the pre-bubble U.S. of 2007.

Impressive price gains coupled with low interest rates and ultra-high levels of consumer debt. Make no mistake, the similarities are there between the current housing market and the pre-disaster environment of the United States, argues a new infographic produced by Ratehub.ca, just ahead of government’s budget announcement Thursday.

But, the differences between the two sides are even more striking, according to the report, pointing to stricter underwriting and legislative standards in this country, Canada’s limited exposure to the volatile mortgage securities market and its more modest use no-money-down home loans, which effectively drove many U.S. homeowners underwater.

“Fact: 47 per cent of all mortgages initiated in San Diego County in 2004 were interested-only loans,” reads the repor, contrasting that to the less than 5 per cent of mortgages in this country that can be called "subprime" and the absence of “teaser rate” and interest-only product.

The research comes just ahead of the government’s budget announcement. While many industry insiders have suggested the government will resist calls from the banks to tighten mortgage rules at this juncture, many others are concerned it will use Thursday’s address to tweak the qualifying standards for insured mortgages.

The RateHub.ca report may allay those concerns by highlighting the regulatory regime in Canada that continues to insulate it from the kind of housing collapse the U.S. suffered.

The infographic argues that the housing market will slide to a soft landing and not the crash experienced south of the border.

Early numbers are lending the idea support, with CREA confirming that price gains across much of the country have begun to moderate. While the association’s MLS Home Price Index (HPI) was up 5.1 per cent in February, compared to a year earlier, the increase was the smallest since last June. It was also the fourth straight month that price gains slowed.

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