Slowdown raises questions about mortgage rules

Slowdown raises questions about mortgage rules

There's real fear among economists that new mortgage rules may add insult to injury, with new numbers pointing to a price and sales decline for the Canadian market in June.

“Even before the new mortgage rules kicked in, all signs suggest that the Canadian housing market was already cooling," BMO economist Douglas Porter told reporters. "The new rules will simply pull hard on a closing door.”

But June numbers suggest that door has already been pulled tight.

In total, there were some 4.4 per cent fewer homes sold last month compared to the year-ago period, according to the Canadian Real Estate Association’s latest numbers.

In terms of prices, the average seller of a home in June 2012 received $369,339, down 0.8 per cent from the same month in 2011.

The double whammy marks an about-face for a national housing market that the federal government, among other key stakeholders, viewed as primed for a major correction if intervention wasn't initiated.

That assistance came earlier this month and after Finance Minister Jim Flaherty announced four mortgage rule changes meant to slow demand.

The June numbers do not reflect that intervention, and the slide raises questions about whether the changes were in fact necessary.

"Homebuyers didn’t rush their purchases before the most recently announced changes to mortgage regulations came into effect," CREA's chief economist Gregory Klump said.

Broker associations have been among the most vocal in questioning the timing of the rule changes and, indeed, the necessity of bringing them into force.

"We want the government to understand the role of self-employed, small businesses and new home buyers in the strength and stability of the economy," writes Ontario-based Syndicate Mortgages in a response to the new rules. "We are not in opposition with government but we just want to help them take a decision that proves beneficial in the long run.”