Year-old mortgage rules could halt entire housing market

Year-old mortgage rules could halt entire housing market

Year-old mortgage rules could halt entire housing market A year after the federal government introduced a slew of mortgage rule changes, including a stringent mortgage stress test, Dominion Lending Centres argues that the entire housing market could be imperilled if left unrectified.

“If the rules don’t change, you’re going to see an impact in the marketplace, and it’s a domino effect,” Dave Teixeira, DLC’s vice president of operations, public relations and communications, told MortgageBrokerNews.ca.

Teixeira claims the average Canadian now has up to 20% less buying power, and the long-term ramification is a stunted market.

“If you don’t have young people getting out of rental space and into homes, then we deplete our rental stock, which, in some markets, are very, very low. If you deplete the rental stock, you’ll have families who will be less able to find rental properties and climb that property ladder. It’s an issue that can harm the entire housing market as time goes on. If you look across Canada, you’re not seeing rental stock rising or new builds happening as quickly or efficiently as in the past. Now Canadians unable to get refinancing are staying in the rental pool, or at mom and dad’s.”

The government’s intervention has also deleteriously affected the mortgage industry, he added, by sending more consumers to big banks because monoline lenders haven’t been able to service them.

“When you give Canadians less choice of where they can go to purchase a home, across the board our business has shifted greatly to banks instead of monolines,” he said. “What’s good about us is we’re agnostic, so if you change the rules that push consumers to banks, we can manoeuvre, but Canadians who are self-employed or bankrupt, some banks won’t touch them.”

DLC is lobbying government to pause the implementation of any new rules and properly study their potential impacts, and to take regional approaches to their application. Teixeira added DLC wants amendments made to portfolio insurance requirements because some monoline lenders can no longer insure mortgages, which has stifled competition in the industry.

“They made an adjustment to portfolio insurance, so now there’s 80% evaluation that we’d like to drop to 75%. It’s created problems, not just with new homebuyers, but throughout the marketplace.”

DLC collected stories from consumes country-wide about how they’ve been negatively impacted by these rules changes, hoping the federal governments heeds its advice.