Proposed Changes to Mortgage Underwriting Practices: BCREA’s Response
The federal Office of the Superintendent of Financial Institutions is considering changing residential mortgage insurance underwriting practices. One of these changes would require a qualifying stress test for all uninsured mortgages, which could negatively impact housing affordability.
Homeownership is an important achievement for many Canadian families. Requiring all uninsured mortgages to have to qualify for a higher mortgage rate than can be negotiated between borrowers and lenders may put homeownership out of reach in some markets. This may particularly impact first-time buyers who often face additional struggles securing financing.
Plus, the housing market is still adjusting to recent changes. Over the past eight years, the federal government has implemented seven rounds of measures to tighten mortgage lending rules. The most recent were regulations affecting mortgage lending introduced last fall, which added to housing market uncertainty among buyers and sellers. Also, the Bank of Canada increased its prime rate by 25 basis points in July 2017, and many economists predict the rate will rise again in October. These changes compound the previous seven housing policy measures.
Making more changes now could imbalance local markets across the country and has the potential to negatively impact the Canadian economy. Particularly in British Columbia, where homebuyers face the highest provincial Property Transfer Tax in the country, any tightening of underwriting policies can put homeownership out of reach.
BCREA encourages the government not to make fundamental changes to the national housing finance system at a time of rising interest rates. This recommendation is echoed by the Canadian Real Estate Association, as well as the House of Commons Standing Committee on Finance.
The government’s public consultation period on this proposal closes August 17, 2017. For more information on the consultation and to make a submission, visit the government’s website.
Read BCREA’s full submission here.
This submission is part of BCREA’s ongoing advocacy work to ensure REALTORS® voices are heard by governments and that housing affordability is protected.