The national broker organization hopes “mortgage difficulties” – including arrears and defaults – which are expected as a result of job losses in oil-producing regions won’t encourage the government, the lenders and the default insurers to further tighten mortgage lending rules.
“CAAMP is concerned that these difficulties should not lead to a ‘pro-cyclical’ tightening of lending conditions on the part of the federal government, mortgage insurers, or lenders,” CAAMP wrote in its recently released spring report, A Profile of Homebuilding in Canada. “Any such tightening would aggravate the weakness in the housing market, with the further consequence that weakness in the broader economy would also be aggravated.”
The association estimates that July 2012’s sweeping mortgage rule changes decreased mortgage activity by 20 per cent at the time and that that impact has only been diminished by half. It attributes this decline as a factor in the slowdown of job creation in Canada.
Assuming no further tightening is implemented, CAAMP forecasts residential mortgage credit in Canada will grow by 4.5 per cent in both 2015 and 2016, a slightly lower projection than recent growth rates of five per cent.
However, the housing market is weaker than it appears, according to CAAMP who believes two major hot markets are masking drearier performance across the country.
“In much of Canada, housing demand has weakened: resale activity is quite moderate and prices are close to flat. However, in a few major market areas, notably the Toronto and Vancouver areas, there are severe supply constraints (due to shortages of building lots for low-rise housing),” CAAMP wrote. “In Toronto and Vancouver, the determining factor is lack of supply rather than reduced demand. In those two markets, prices are increasing very rapidly, which is causing the national average resale price to increase.”