Five weeks into the latest B-20 regime is all it’s taken for brokers to sound off.
Homebuyers are having trouble qualifying for mortgages, as was predicted, and many are securing loans from the private channel. According to Ron Butler
of Butler Mortgages, in the name of cooling down two overheated markets, the government has callously acted against the interests of consumers.
“If you live in Medicine Hat and want to finish your basement by refinancing, why should you be afflicted because of something that’s about two big cities in Canada,” Butler said of Toronto and Vancouver. “If your qualification test forces them out of A lending and into B lending, you’ve totally screwed the consumer, and why should that be government policy?
“Why a federal government creates a countrywide regulation when there are only two major metropolitan areas that are important to this formula—why is it that somebody who’s just making an average living in Winnipeg is going to have to be affected by it at all? Something tells me the government doesn’t know what it’s doing. It’s not being careful enough making sure consumers in their everyday lives are not affected by this.”
Passing a 200 basis point stress test is no easy feat, but combined with rising interest rates and foreign ownership that shows no sign of abating—and which augments price points—Canadians could have even more difficulty attaining homeownership.
Alluding to the 15% foreign buyer tax, Butler says it did the trick and, in tandem with other measures, helped bring the cost of housing down.
“In both of the provinces where the provincial governments introduced stiff controls on foreign investments in properties, activity and pricing dropped,” said Butler. “Prices are down in Toronto from April of last year. They’re all down – some slightly and some a bunch. So with prices down anyway, hasn’t the crisis been averted? Yet we continue to add more and more regulations.”
Just how much are borrowers being squeezed?
Krista Lawless, broker and co-owner of Lawless Brown Mortgage Team of VERICO Mortgage Depot, says a lot—especially with the interest rate hike a few weeks ago.
“The new stress test has made brokering more difficult all around,” she said. “The rate hikes are now making it that much more expensive for our borrowers. Those who need to access equity in their property have no choice but to pay the higher rates. With every increase in the qualifying rate, it decreases the loan amount for our borrowers, which can make it a challenge, depending on what their goals are.”
Lawless also called January’s B-20 update “premature” because no time was accorded to the other regulatory measures.
“With rates already on the rise and the Toronto and Vancouver markets adjusting to the foreign buyer tax, I feel they should have waited an appropriate amount of time to see the full impact of those changes in the housing market and then evaluated to see if any further changes were needed,” she said. “The rules implemented have affected everyone coast-to-coast. Borrowers are more limited in their choices and will be forced to seek private financing elsewhere—at a much higher cost—if they do not meet the new government regulations.”
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