About the New Mortgage Rules
On Oct. 3, 2016, the federal government introduced mortgage rule changes making it significantly more difficult for Canadians to purchase their home and in some cases, re-finance the home they currently own with the lender of their choice. The government’s “stress test” means that all new mortgages need to qualify at the greater of either the Bank of Canada posted rate (4.64 per cent) or the contract rate. This immediately had a profound effect on the lives of hard working Canadians across the country. At the time, thousands of families were either going through, or preparing for their journey to homeownership, only to find out the rules had shifted. Through no fault of their own and without any warning, these prospective homebuyers were cruelly forced to alter, and in many cases, abandon their dreams of homeownership.
So we – mortgage professionals and lenders – decided to empower ordinary Canadians through New Rules Hurt, a collection of stories gathered from around the country. These are real life examples of the new mortgage rules adversely affecting a broad range of citizens, from teachers and healthcare professionals to single parents and seniors.
We are encouraging the leaders in Ottawa to support these changes:
- Suspend all measures yet to be implemented to analyze whether the already-implemented changes will have the intended policy impact.
- Using the Bank of Canada posted rate as a benchmark is excessive in our view, as an overnight two percentage point increase in mortgage rates is unlikely given the low inflation rate and moderate growth in Canada. We recommend a more modest benchmark rate that sits halfway between the Bank of Canada posted rate and the current contract mortgage rate.
- Adjust the November 30, 2016 change to allow for refinances to be included in portfolio insurance. If an 80 per cent loan-to-value ratio is objectionable, reduce the threshold to 75 per cent rather than removing eligibility to these products entirely. This adjustment would alleviate some of the competitive disadvantage pressure the cumulative effect of these changes place on the non-bank lenders.
- Reconsider the increased capital reserve requirements for lenders implemented on January 1, 2017 especially on insured mortgages.
- A review be conducted into the long-term impact of regional-based pricing on the Canadian economy as a whole, and the potential additional harmful effects on already strained regional economies.
- Refrain, at this time, from implementing the proposed risk-sharing model.