Any revisions to the mortgage qualification rules might prove premature, and even disastrous
Tighter mortgage regulations have significantly improved the Canadian housing market’s stability, as default rates remained low and residential mortgage growth has slowed, CMHC argued.
The observation echoed National Bank of Canada CEO Louis Vachon’s statement in mid-October. The executive said that revising B-20 at the moment would be too hasty, as the effects of the regulatory regime have not been uniform.
“I think we need to give a little bit more time to go by to assess how it’s impacting different markets in different parts of the country,” Vachon told Bloomberg in an interview at the time.
The Crown corporation added that any market weakness will moderate over the next few years as a result of these factors. As a whole, these trends support the Bank of Canada’s latest decision to hold its interest rates.
Keeping rates flat would prevent a “resurgence” of credit, which has been previously cited by the central bank as a significant economic risk. However, CMHC emphasized that global interest rates veering downward could “re-incentivize” mortgage credit growth in 2020.
CMHC also reported that Mortgage Investment Corporations represented $13 billion in market volume as of the end of 2018. These firms, which do not fall under the rules that govern chartered banks, are estimated to grow by around 10% year-over-year, far outstripping the average increase of 2% for other mortgage entities.
