CHBA Challenges Mortgage Rule Changes

Frankly, it’s to be expected. The Canadian Home Builders’ Association exists to serve the interests of the industry and to help its members succeed and prosper. So when new rules were announced last week that will potentially be a wet blanket to the Canadian real estate market, it inevitably provoked a response.

What surprises me is that the CHBA wants Mr. Flaherty to be ready to  intervene again in the near future – as though enough damage hasn’t already been done.

Now that amortizations are back to where we essentially were a half-dozen years ago, it’s time for the government to step back and let the market take care of itself.    While many Canadians have profited from the lax rules of the past few years, others have become indebted beyond their means for life.  Still more potential buyers hesitantly wait on the sidelines, unsure when real estate will find a stable footing once again.

Below is the first page of the letter that the CHBA president wrote to Mr. Flaherty:

I am writing in regard to your announcement of last week concerning changes to the rules governing federally-insured residential mortgages, including a reduction in the maximum mortgage amortization period from 30 years to 25 years.

In recent weeks, we have followed with interest your comments, and those made by the Governor of the Bank of Canada, about the importance of housing market stability to Canada’s economy, and to the financial well-being of Canadians. We share this concern. As our industry is a major contributor to Canada’s economic performance, and housing represents the largest pool of private wealth in Canada, such stability is of paramount importance.

We have also noted your concern about housing activity in certain Canadian markets. We had not,however, anticipated the need for additional tightening of mortgage rules at this time.

Our field reports indicate that market activity and prices have been moderating.The new mortgage rules you introduced will affect all housing markets across Canada, many of which have not yet recovered fully from the ‘Great Recession’. This heightens our concern over the impact these changes may have on prices, and on the jobs and investment tied to housing activity in a number of markets.

The shorter maximum mortgage amortization period will reduce access to homeownership. For those who would otherwise have selected a 30-year amortization, it will take additional income each month to service new mortgage debt.

Some potential new home buyers will no longer qualify, and this will disproportionately affect younger first-time home buyers, delaying their entry into homeownership investment.

Given the government’s concern over new housing market stability in today’s very uncertain economic climate, I respectfully ask for your commitment to monitor closely the impacts of this latest round of mortgage rule changes, and to do so in consultation with our industry, as we are inthe best position to know how new housing consumers are being affected.

Specifically, I would ask for your commitment to meet with us, by mid-October at the latest, to share information on current market conditions. We also ask that you stand prepared to take action should the results from these tighter mortgage rules be more dramatic or negative than anticipated…

You can read the entire letter here

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