A flurry of measures have been announced in recent weeks – but what impact will they have?
Expanded access to 30-year amortizations. A higher insured mortgage cap. An end to stress testing on uninsured mortgage holders switching lenders at renewal time. Recent weeks have seen a slew of new measures unveiled by the federal government in the housing and mortgage sectors – but have they had a material impact on improving the outlook for homeowners and hopeful buyers?
Moves to ease affordability challenges are to be welcomed, but brokers and their clients shouldn’t take the news as a sign of a sea change when it comes to every borrower’s ability to purchase a home, according to a leading government relations expert in the industry.
JP Boutros (pictured top), a mortgage brokering sector advisor and current member of the Financial Services Regulatory Authority of Ontario (FSRA) Mortgage Brokering Strategic Advisory Committee, told Canadian Mortgage Professional that first-time buyers should remain clear-sighted when it comes to their reasons for purchasing a home.
That’s because with surging homeownership costs, including land transfer taxes and development charges largely front-ended, the financial benefit of new buyers staying in a home that they own only starts becoming apparent after around eight to 10 years, according to Boutros.
For those buyers, then, a home purchase should be made with the right intention in mind – namely, finding a home they can live in and love – rather than as an investment or a FOMO-type buy. “Will the asset go up [in the short term] greater than the cost of borrowing? The math isn’t quite there yet,” he said.
Higher-than-expected insured cap increase raises eyebrows
Influential figures and mortgage industry associations had long called for the insured mortgage cap to be raised, although the decision to up it as high as $1.5 million came as something of a surprise.
Critics of the bigger-than-expected increase charge the government with potentially bringing about a free-for-all, intensifying competition and potentially further indebting Canadians down the road as they bid on properties with eyewatering prices.
The Greater Toronto Area housing market might finally be picking up steam again, as new data from the Toronto Regional Real Estate Board (TRREB) showed encouraging increase in home sales and listings in September.https://t.co/xQmqYMtQGl
— Canadian Mortgage Professional Magazine (@CMPmagazine) October 4, 2024
Speculation had arisen on the prospect of a return to 30-year insured mortgage amortizations as early as 2019, when Bill Morneau was federal finance minister. That policy, and a tweak in the insured mortgage cap, should have been introduced long before this year, Boutros argued. “It’s a shame that it’s taken this long,” he said.
“All of these things in moderation should have been done three and four years ago and it would have been a greater benefit to everybody. Now it’s just basically restarting everything that happened in 2018 and 2019… We’ll know in a few years, but all of the conditions suggest that that’s going to be the case.”
For single Canadians – a growing tranche of would-be first-time buyers – living in the centre of a major city and being saddled with heavy mortgage costs, not to mention condo fees and other considerations, likely has little appeal in the current climate, Boutros said.
An important decision for hopeful buyers to make, he said, is whether it currently makes more sense to rent or buy at present, especially if rental costs are more reasonable than the burdensome cost of a mortgage. “The math has to check out,” he said.
Could that skew the market further towards investors who choose to purchase the place, rent it out and let somebody else pay off the mortgage? “That’s where the problem lies,” Boutros said. “Those people [investors] are going to come back into the market now in ways that they didn’t before. Why would I buy a place when I can rent it if I’m the potential tenant homeowner, and why wouldn’t I buy it if I’m the investor?”
Boutros welcomed the decision by the Office of the Superintendent of Financial Institutions (OSFI) to scrap the requirement for homeowners to stress test when switching to another lender at renewal, a practice he described as “anti-competitive and anti-consumer.”
He said that reality was “patently obvious to all but OSFI and a select few who benefited from maintaining that protectionist policy,” and criticized the length of time it took for the regulator to enact the change.
“That it took so long for OSFI to be pulled kicking and screaming to the only reasonable outcome both prolonged the frustration of tens of thousands of desperate – yet otherwise qualified – mortgagees from moving to cheaper lenders,” he said, “and further reminded us all that OSFI protects big banks, not average Canadians.”
What other measures could the government introduce on housing?
There remain a host of other changes authorities could consider when it comes to improving housing affordability and availability, he added, with supply remaining a significant headache.
Development charges are a sizable impediment to construction. “You’re not making it easier for builders to build,” Boutros said. “But equally, builders only build when there’s a real profit motive and investors are satiated. So there has to be some conversation about how to properly fund cities, whether it’s a municipal tax or regional.
“The border of the City of Toronto, the 416 has that extra 1% consumption tax but Markham might not, or Richmond Hill or Mississauga does, and you have to talk more regionally and that money has to be directed and siloed for particular things.”
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