B-20 'kind of overkill' in the present climate – builders

B-20 'kind of overkill' in the present climate – builders

B-20

The Canadian government should begin to ease on the much-tightened mortgage regulations introduced at the beginning of this year, as these rules have already fulfilled their mandate of moderating housing markets.

“We’re going to continue to lobby for a pullback now on B-20,” Mattamy Homes Canada CEO Brad Carr told Bloomberg. “That had a very targeted outcome. It’s been achieved so it’s kind of overkill now.”

“We’re right in the midst of a soft landing, certainly something that we predicted and actually helped influence,” he added. “It was necessary. The market here was running a little hotter than we thought it should for the long-term health of the market place.”

The stricter stress-test rules have certainly made themselves felt in what is arguably Canada’s hottest market: In April, Toronto’s average home sales price declined by 12% year-over-year, and has evened out around that lower level since then.

Read more: Rate hikes, regulatory changes moderating mortgage risk – BoC

As rates rise, “they’re doing their natural job and that 2% spread, we certainly hope the government will either remove it or at least cap it,” Carr stated, referring to the spread above the contracted rate which all borrowers, even those with 20% down payment and those who don’t require mortgage insurance, are required to prove that they can repay.

Mattamy Homes founder and CEO Peter Gilgan noted that dialling the spread down to 1.5% or 1% would be ideal in current market conditions.

The Canadian Home Builders’ Association agreed with the sentiment, saying that B-20 is disproportionately impacting already-burdened markets like Calgary and marginalizing millennial would-be buyers.

“Ideally at this point the best thing would be for the new stress test to be repealed, just removed,” CHBA director of communications David Foster said. “Markets like Calgary, they’re already quite soft, are just hammered by this.”

 

Related stories:
Household debt a major risk for Canada and other leading economies
Borrowers can renew at pre-2014 interest rate

 

1 Comments
  • Victor Simone 2018-12-04 1:13:56 PM
    I'm glad this story was picked up in the forum here.

    Not only are builders have difficulty selling real estate, but regular Canadians have been having an unfair time trying to live their lives since the B20 rules. This is not good, folks.

    Perhaps a new federal government can figure out this mess and restore the previously prudent lending practices prior to the B20 ?

    Moreover, another year of maturing mortgages requiring a consolidations or a new purchase will bring more borrowers to market and be subjected to B20. At some point the Feds and powers that be will be pressured to ease off the brake. More Canadians are looking for new money only to be frustrated with this B20.

    Many new borrowers or folks needing to borrow again, are starting to make noise, and it's about time.
    Post a reply