On the heels of the federal government declining the Federal Conservative Party of Canada’s proposed subcommittee review of B-20—the second time it quashed the proposal in a matter of weeks— Croft Axsen, owner of Dominion Lending Centres Jencor Mortgage Corporation, says the government is trying to save face.
“The level of restriction has become common knowledge in the economy, and the government probably wants to keep that from being on the front page of the papers— a report on the subcommittee isn’t what they’re looking for,” he said. “They’re probably looking to keep it quiet.”
An unintended consequence of stress testing mortgages, he furthermore asserts, is that borrowers are at the mercy of lenders—and the government is to blame.
“They have done something they don’t understand,” said Axsen. “I don’t think they understand the mortgage market and how much competition existed previously, how easily borrowers could get comparative rate offers from other lenders. The existing lenders do not have to offer as a good a rate on the renewals because they know people can’t shop.”
Banks used to send out renewal offers with posted rates, however, the emergence of the broker industry empowered borrowers. Now, even though lenders are only required to be “prudent,” according to the diktat, Axsen fears a return to the days of unjustifiably higher interest rates.
The Deputy Shadow Minister for Finance, whose proposal was declined, says B-20 is harming Canadian families and he accused the federal Liberals of callousness for introducing stress testing during a year in which nearly half of mortgages are due for renewal.
“The Ottawa Liberals have acted callously by subjecting Canadians to this mortgage stress test in a year where 47% of all mortgages need to be refinanced,” MP Tom Kmiec said in a statement. “Despite knowing that so many Canadians would face refinancing this year, they still imposed the stress test. That was irresponsible and unfair. Now the Ottawa Liberals are refusing to even hear evidence on what impact their changes are having on Canadians.
“Both of my motions have been reasonable attempts to gather more information on these new mortgage changes. I was willing to make amendments to my motion, and I was willing to be collaborative. The Ottawa Liberals, however, were unwilling to work with me to come to an agreement on a mortgage study.”
Given the escalating number of desperate families taking out private loans this year, Axsen wishes Kmiec’s proposal was given consideration rather than dismissed outright.
“The result we’re seeing is a lot of people getting refinances that they might have achieved in the last 25 years now need to go to private lenders to retain their homes, or face putting them up for sale,” he said. “So there’s a dramatic impact on people’s lives. I don’t think it’s government policy to force people out of their houses, or take 12% to 15% private money to solve their financial problem.”
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