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Mortgage brokers want more incentives, fewer restrictions on new home buyers

Canada’s mortgage brokers claimed a victory of sorts when the federal government introduced no new mortgage rule changes in last week’s budget. Now they are hoping for similar success with the Ontario provincial government, which is expected to introduce its own budget in coming weeks.

In a presentation to the standing committee on finance on February 1, Mortgage Professionals Canada (MPC) argued that the introduction of a stress test last November had negatively impacted the mortgage broker channel by decreasing competition, had increased financing costs and decreased purchasing power for consumers. The group was particularly concerned that the new rules were increasing the strain on consumers by causing premiums on non-conventional mortgages to rise for third time in as many years.

The presentation showed that a mortgage of $300,000 at a posted rate of 2.5 per cent would carry a monthly payment of $1,343 while the same amount with the 4.6 per cent stress test rate would cost the borrower $1,683. The brokers recommended suspending all further regulatory measures, and called for the federal government to uncouple the stress test rate from the big five banks’ posted rates, using instead an independent mechanism to determine the rate. Following the release of the budget, MPC president Paul Taylor said “We are pleased that government has listened to our concerns and not introduced any additional measures that would negatively impact Canadian mortgage consumers.”

Scenarios for impact of stress test based on posted rate. Source: Canada Mortgage Professionals/Will Dunning

Today, as Ontario’s finance minister prepares his budget for 2017, MPC held meetings with Ontario MPPs in which issues of housing affordability, availability and accessibility in the GTA housing market were discussed. No doubt hoping to exert their influence with similar success at the provincial level, the group says it has recommended a number of steps it believes would improve affordability and new home sales in the GTA.

One measure the brokers are opposed to is a foreign buyers’ tax, something the government has been considering recently, saying it would do nothing to solve the problem of lack of housing supply in Toronto, and could create “adverse effects” on national and provincial economies.

In the GTA, lack of supply is impacting affordability for many of the middle class. Imposing a foreign buyers’ tax does nothing to solve a lack of supply and could create adverse effects on the national, provincial and regional economies. We encourage the government of Ontario to continue to work with municipalities to remove barriers to development and find ways to encourage supply in the GTA, as well as help with affordability and encourage new home sales overall. Increasing supply through decreased red tape, increased investments in critical infrastructure and increased incentives for single family home construction would help alleviate some of the affordability challenges in the region.

At present, affordability is declining as consumers must spend a higher percentage of income on housing, but there is “no evidence” that this is being driven by foreign buyers, says CMP. Housing price increases are driven, rather, by lack of supply, immigration and interprovincial migration, with 186,000 newcomers to Ontario in 2016.

More incentives, fewer punitive measures, will help get people into the housing market, say Canada’s professional mortgage brokers.

Rather than imposing what it sees as punitive measures, MPC would like to see the government work with municipalities to remove what it calls barriers to development, and to encourage supply. “Increasing supply through decreased red tape, increased investments in critical infrastructure and increased incentives for single family home construction would help alleviate some of the affordability challenges in the region.” MPC also wants to see more incentives for homebuyers, like the recently enlarged rebate on the provincial land transfer tax, to encourage more first-time buyers to enter the market.

Finance minister Charles Sousa will introduce Ontario’s 2017 budget in coming weeks and has said that it will include a comprehensive set of plans to deal with rising home prices in Toronto. Sousa commented that demand is high for a number of reasons, which could include speculators and “people from outside the country.” He said that the government would try to address the issue of housing supply in the GTA in the upcoming budget.

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