A year in review: Constant change in mortgage finances

2016 was a big year. Some might even say, surreal. All month, we’ll be sharing some of our own highlights from the past year. Have something to add? Feel free to share in the Comments section below.

The year 2016 will soon fade into the background but with it came more changes to regulations aimed at throwing cold water on Canadian indebtedness in 2017 and beyond.

In February, buyers needing mortgage default insurance (MDI) had to come up with a higher down payment if they bought between $500,000 and $1 million. Then, as of October, they also had to qualify under a tougher stress test.

In November, financial regulations were also tightened for mortgage lenders – and have already caused mortgage interest rates to rise for buyers that don’t need MDI and have mortgages longer than 25 years. And when other measures announced in late 2016 and take effect this month, they’ll add further upward pressure on mortgage interest rates.

Finance Minister Morneau has said he isn’t planning on making any more changes to mortgage rules. CREA is working hard to hold him to that promise.

At the same time, the government launched consultations on “risk sharing” (read “deductibles”) on MDI payouts to mortgage lenders. Should “risk sharing” become a new policy, mortgage insurers would pay out lender mortgage loan losses net of a deductible. The purpose of the government’s consultations seems less to receive feedback on the merit, inadvisability and/or necessity of “risk sharing” and more on working out the details on how the deductible is calculated.

Your national association’s position is that the government shouldn’t even think (or muse) about any further changes until enough time has passed to gauge how recent policy changes have affected housing markets across Canada. Come the all-important spring home buying season, barely six months will have lapsed since the new “stress test” was announced. Even less time will have passed for the raft of other policy changes.

Before piling on yet more policy moves aimed at cooling Toronto and Vancouver housing markets, it would be smart to let enough time pass to see how recent changes are affecting the rest of Canada’s housing markets – particularly when consumer spending is one of the few things keeping the Canadian economy afloat.

As CREA’s former Chief Economist, Gregory Klump provided his views on the state of and outlook for Canadian housing markets to news media, policy makers, and real estate industry stakeholders. In 2017, Gregory celebrated his 25th anniversary as a member of the team at CREA. He’s an avid skier and snowboarder during the winter and a year-round Crossfit enthusiast.

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