November 22, 2019

Mortgage Rule Changes Hinge on Spring Market

Rob McLister

Government-imposed tightening of mortgage qualifications has clearly been a red hot topic.

Given the public debate over housing valuations, the Canadian Association of Accredited Mortgage Professionals (CAAMP) wants to ensure the government has all the facts before making any mortgage policy changes. As a result, CAAMP president, Jim Murphy, recently met with officials in Ottawa to deliver CAAMP’s latest research findings.

With all the media headlines about housing risk, “It’s important that the government base policy on data and not anecdotal evidence,” he told CMT.

Murphy says CAAMP’s message was “well received by Ottawa.” He adds that the policymakers want to “curtail credit growth” if truly necessary, and have prudent intentions.

“For now, don’t expect imminent rule changes,” adds Murphy. “They’re prepared to wait until (at least) the spring to make any policy decisions.”

Mind you, if home prices ascend strongly in the next few months, the government could then step in with new mortgage restrictions for the 4th time since October 2008.

CAAMP has been taking a visibly more active role in policy issues. It recently hired a government relations firm in Ottawa to assist with upholding the mortgage sector’s “collective voice as an industry.”

CAAMP recently released this analysis of the vital role that housing plays—directly or indirectly—in Canada’s economy. Here are highlights:

•Housing accounts for approximately 8% of Canada’s employment.
•It’s been responsible for 18% of job creation since 2006.
•“A 10% rise in housing values might cause consumer spending to rise by 0.4%,” says CAAMP. (One may presume the reverse is also true.)
•2-3% of home sales nationally are for investment purposes. (The number is notably higher in major metros like Toronto and Vancouver.)
•CAAMP says: “The biggest threat to the health of the Canadian housing and mortgage industry is a recession that results in job losses.”
•Housing risk caused by “an unaffordable rise in payments…is a negligible risk in Canada…A more important risk is reduced ability to pay.”
•“..In the event of a severe housing market downturn that brings substantial price reductions, there is a risk of a downward spiral (in the economy).”
•“..We must avoid any policy changes that would artificially constrain housing activity or reduce the ability of lenders to provide mortgages to qualified buyers,” says CAAMP. “The last thing Canada needs is a policy-induced housing market downturn.”

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