Conservatives’ plan to ease mortgage stress-test rules may raise debt and prices

Andrew Scheer vows to loosen rules around stress test and remove it altogether for mortgage renewals

Federal Conservative leader Andrew Scheer makes a campaign stop in Vaughan, Ont., on Monday, September 23, 2019. THE CANADIAN PRESS/Nathan Denette

Conservative leader Andrew Scheer’s pledge to extend mortgage amortization maximums for some homebuyers and loosen a contentious stress test would likely lead to more debt and higher property prices, some experts say.

“Oh my god, here we go again,” said Tsur Somerville, a professor at the Sauder School of Business at the University of British Columbia, when he heard Scheer’s announcement Monday.

Scheer plans to loosen rules around the stress test, which was designed to ensure buyers requiring mortgages could afford payments if interest rates rose, and remove it altogether for mortgage renewals.

He also plans to allow first-time property buyers to take out 30-year mortgages — reversing moves by Stephen Harper’s previous Conservative government that reduced terms from 40 years to 25 years.

With a longer amortization, first-time homebuyers can opt for a larger mortgage than they might be able to afford payments on if it were for a shorter time frame. Meanwhile, lenders may be able to approve borrowers for larger mortgages if the stress test requirements are loosened.

The stress test — introduced in 2010 and significantly modified in 2018 — has helped to slow accelerating house prices, according to various reports.

The Canada Mortgage and Housing Corp. CEO Evan Siddall defended both measures amid industry lobbying for changes earlier this summer. In a strongly worded letter to the Standing Committee of Finance Siddall said his job is to “protect our economy from potentially tragic consequences.”

The stress test has helped reduce house prices in Canada by 3.4 per cent compared to what they otherwise would have been, he said. The CMHC declined to comment Monday, saying they were not in a position to comment on political parties’ promises or announcements during the election period.

READ MORE: CMHC sets target to make housing affordable for every Canadian by 2030

A TD report released earlier this year estimated home prices could rise six per cent by the end of next year if the stress test was removed and all else remained equal.

Canadian Realtors cheered the proposal.

“Realtors have long asked for common-sense solutions designed to help Canadians purchase a home of their own,” said Jason Stephen, the Canadian Real Estate Association’s president, adding Scheer’s campaign promises include some of their suggested policy changes.

The Scheer plan also includes launching an inquiry into money laundering in the real estate sector, as well as making surplus federal real estate available for development to increase housing supply.

The supply issue is Somerville was in favour of addressing, as increased supply tends to better affordability.

Canadians’ high level of household debt has been a concern. The CMHC previously warned that high debt levels with looming interest rate hikes could lead to lower consumption, less savings or loan defaults.

Canadians owed roughly $1.77 in credit market debt — a figure that includes consumer credit, mortgages and non-mortgage loans — for every dollar of their disposable income, according to Statistic Canada’s most recent figures.

“If we’re concerned about Canadians’ level of debt, why are we helping them take on more debt?” asked Somerville.

Aleksandra Sagan, The Canadian Press

Like us on Facebook and follow us on Twitter

Just Posted

Vehicle of missing Maple Ridge man is found in Abbotsford

Barrie Holt, 63, is also known to frequent Chilliwack area

Editorial: Vote wisely, but vote

There are no backsies when it comes to voting

Chilliwack RCMP officer suing the force for malicious prosecution

Cpl. Tammy Hollingsworth cleared of wrongdoing after misconduct hearing

Time to specify where Chilliwack spending priorities should be

It’s that time of year again when City of Chilliwack engages its citizens to weigh in on budgeting

Council votes to give Chilliwack homeless shelter an 18-month extension

There were more than 40 passionate speakers at city hall who had their say for more than four hours

Scheer, Trudeau, Singh haggle over potential minority government outcome

If you believe the polls, it appears the Liberals and Conservatives are neck-and-neck

Canucks beat Stanley Cup champs 4-3 in a shootout

Leivo nets winner, Vancouver dumps St. Louis for fourth straight win

‘The more you test, the more you find’: Beef recalls a sign of success, experts say

Despite appearances, experts say a recent rise in major recalls is not a sign of food supply problems

Workers at four Vancouver hotels ratify contract with higher wages, job security

Unite Here Local 40 president Zailda Chan says it’s the first hotel strike in Vancouver in nearly two decades

Japanese buyer expands wood pellet contract with B.C.’s Pinnacle

Mitsui and Co. increases contract with Interior energy producer

ELECTION 2019: Have Justin Trudeau’s Liberals really cut middle-class taxes?

Conservative Andrew Scheer vows to cut bottom bracket, NDP’s Jagmeet Singh targets wealth tax

UPDATE: Vehicle located and driver arrested in relation to fatal hit-and-run

Male pedestrian in his 50s died after being struck by vehicle on Highway 11 in Abbotsford

Talk to your kids about vaping, B.C.’s top doctor says

B.C. health officials have discovered the first vaping-related illness in the province

Alberta truck convoy plans counter-protest at climate rally with Greta Thunberg

United We Roll organizer says similar protest planned for Swedish teen’s event in Edmonton

Most Read