Could these changes just paper over the cracks?
New rules aimed at boosting mortgage affordability for Canadians are coming into effect on Sunday (December 15) – but while those may have some impact for borrowers on the margins, calls are continuing for the federal government to focus on ramping up home construction and improving the country’s chronic housing supply shortage.
The rule changes will see 30-year amortizations offered to all first-time homebuyers and Canadians purchasing a newly built property, and an increase in the insured mortgage price cap to $1.5 million – making more expensive homes eligible for a downpayment lower than 20%.
But those adjustments are missing the mark when it comes to addressing the root cause of Canada’s housing crisis, according to Laval-based broker Ryan La Haye (pictured top) of Planiprêt - Groupe RLH, who told Canadian Mortgage Professional they do nothing to improve the inventory crisis that’s long gripped the market.
“The problem is that there’s not enough housing,” he said. “And I don’t see how any of these policies are helping that issue. They’re just sort of Band-Aids on a wound that hasn’t been treated for so long that it’s festering.
“And so now the government is throwing out a lot of candy. It’s good news for mortgage brokers because it means that more people will qualify – but more people will qualify in a market where there’s not enough housing in most areas across Canada. I’m not sure that this is good news for Canadians.”
TD Economics estimates a potential shortage of more than 300,000 housing units across the country between 2023 and 2025 with the pace of homebuilding expected to slow after this year.
A new report by national housing agency Canada Mortgage and Housing Corporation (CMHC) has also shone a light on the affordability crisis weighing on would-be buyers, especially in the priciest markets of Toronto and Vancouver.
Mickey Khaneka of DLC Clear Trust Mortgages advises borrowers to shop around and consult professionals for the best renewal rates, as recent regulatory changes increase lender competition. https://t.co/u9NjBR73wI#MortgageRenewal #HomeLoans
— Canadian Mortgage Professional Magazine (@CMPmagazine) December 9, 2024
Extended amortizations unlikely to be a game changer
While the move to expand amortization options for new buyers may offer a slight improvement in affordability for some, La Haye questioned whether it meets the government’s description of the “boldest mortgage reforms in decades.”
First-time entrants to the market and people feeling the squeeze from higher rates will see some relief from that option. “But again, there are a lot of complaints and noise around it – but when it comes down to it, most people are completely fine with paying the extra amount,” he said.
“Even if it’s $300 a month, it impacts their budget, but from the perspective of, ‘I’m not going to get to go to Hawaii this year,’ or ‘I’m not going to be able to go to that restaurant twice a month,’” he said.
“They’re going to be OK. It’s normal that mortgages are going to fluctuate and that that’s going to cost more. So the 30-year amortization – people are happy to take it because it’ll lower their budget. But in generally, they don’t really need it. They’re able to squeeze.”
How will the removal of the stress test at renewal time impact the market?
Canada’s banking regulator has also recently scrapped the requirement for borrowers to stress test on uninsured mortgage switches at renewal time, a move many believe will increase competition among lenders and accelerate a push towards lower mortgage rates.
Still, La Haye said it’s unlikely to prove a significant boost in driving more business towards brokers. “It might help a few people, but then again retention is so strong by lenders and so aggressive – and they don’t underwrite at retention.”
If a client has no other mortgage needs and just want to renew, he said, “in most cases the lender is a quarter point if not half a point under what we would offer. So I’m not sure this [change] is even going to help brokers to a certain extent.”
The viability of the renewal switch market for brokers has been reduced “significantly” for brokers in recent times, according to La Haye, with origination most likely to serve as the main driver of business looking ahead. “Just a clean switch for a better rate – I don’t see where a broker steps in there,” he said. “I don’t see the added value.”
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