Tougher mortgage rules would cause ‘substantial damage,’ says broker
Mortgage broker Dominion Lending Centres is warning the federal government that another round of lending restrictions will further stifle the home ownership dreams of Canadians and potentially stunt the economic contributions of the housing sector.
The company ran full-page newspaper ads on Tuesday asking Prime Minister Justin Trudeau and Finance Minister Bill Morneau to change mortgage rules that Dominion Lending says have “reduced the average Canadian family’s purchasing power by upwards of 20 per cent.”
CEO Gary Mauris said the ads and a website called, NewRulesHurt.ca, are being launched as the Office of the Superintendent of Financial Institutions (OFSI) is considering adding even more rigour to last year’s mortgage stress testing.
If that happens, applicants for uninsured mortgage, who have a 20 per cent down payment, will have to qualify at 2 per cent above the posted rate. It will make qualifying for a loan more difficult to a larger swath of Canadians, said Mauris.
Canadian default rates are among the lowest in the world, he said.
OFSI head Jeremy Rudin said Tuesday that he expects to finalize lending guidelines by the end of the month and that they would take effect by the end of the year.
It would probably take about six months to see what expanded mortgage restrictions will do to homebuyers and the economy, but changes in the past year, including the introduction of a foreign buyer’s tax in Ontario, “had a substantial impact,” said Mauris.
“You’re in a market in Ontario where you see the reversal of a very strong economy in the housing sector that turned almost instantly. We expect to see substantial damage if and when they implement these stress tests on all mortgages fairly quickly,” he said.
“You’re forcing people who maybe have a sick relative, who have a student in university, in many cases to go seek alternative financing from a secondary lender or a B-space lender at a rate that is much higher than we previously get them,” said Mauris.
He’s taken his case to committees and MPs in Ottawa, but it’s difficult for the first-term Trudeau Liberals to admit they made a mistake last year, Mauris said.
“It was a reaction to two overheated housing markets, Vancouver and Toronto. It’s the equivalent of being a high school teacher and punishing the entire class for the misbehaviour of two students. They’re going to punish the entire country,” he said.
The market will adjust, but another round of stress testing will slow the economy further
“We just wanted to remind the government that these changes they made 12 months ago are still having a significant impact on the ability for Canadians to get into home ownership and refinance existing mortgages and, in many cases, were giving Canadians much less choice, which ultimately cost them more money,” he said.
Dominion Lending Centres facilitated 61,000 mortgages last year and has 350 offices in Canada.
The company’s new website features stories from every province, who lost out on buying a home, were forced to consider alternative lenders or struggled to refinance a house to pay off other debts. They are the true stories of the mortgage broker’s real customers, said Mauris.