CIBC’s decision to level the playing field between domestic and foreign buyers by requiring the latter to adhere to OSFI’s B-20 guidelines is being lauded by mortgage brokers.
As of this month, the charter bank discontinued the Foreign Income Program, which allowed foreign buyers to qualify for uninsured mortgages with 35% deposits. Elan Weintraub, a mortgage broker and director at Mortgageoutlet.ca, noted that foreign buyers have had an easier time qualifying for mortgages in Canada than Canadians, which he called confounding.
“I think foreign buyers should not have an advantage over Canadians,” he said. “Aside from the liquidity issues, some people feel those policies are anti-Canadian, and when I say that I mean you have your mom and dad and family, and they put 40% down and the bank is going to scrutinize every financial, tax return and job letter they have, but someone from another country writes a cheque for 35% and there are no questions asked.
“Aside from the liquidity, which I think is where OSFI is coming from because of the systemic risk of just lending people money without income verification, some people say it’s unfair to Canadian.”
Daniel Johanis, a Toronto-based mortgage Broker with DLC Mortgage Centre, says a level playing field is long overdue.
“We definitely had to go through a few more hoops domestically than foreign buyers have, and I don’t think [CIBC’s discontinuation of the Foreign Income Program] is a bad thing,” he said. “In my opinion, Canadians should be at the front of the line and have the first crack.”
Johanis believes that forcing foreign buyers to adhere to OSFI guidelines could curtail speculation and, by extension, the prevalence of empty units.
“I’ve seen some developments where the majority of the units are sitting vacant; they’re more speculative with foreign buyers holding them,” said Johanis. “It isn’t conducive to creating a community. The occupancy rate is far below what it should be.”
There has been talk in British Columbia about prohibiting foreign buyers from purchasing real estate in the province, but Weintraub says that would be going too far.
“I think a foreign buyer ban is a very strong tool and I wouldn’t be supportive of that,” he said. “It sends a broader political message and it’s kind of like using a sledgehammer to kill a fly. We want capital to be liquid and mobile; we don’t want a million government restrictions on who we can our sell our houses to and why and when.”
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