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Several Real Estate Boards Called on All Levels of Government to Make Home Ownership More Accessible


Under Real Estate

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September 17th, 2019

Surging home sales in the key Canadian housing markets of Toronto and Vancouver aren’t stopping realtors throughout Canada from calling for looser mortgage stress testing. The same stress testing that was credited with an earlier cooldown in sales activity.

In a statement the Toronto Real Estate Board released this week, several boards, including TREB itself, called on all levels of government to “make home ownership more accessible.”

One way to do this, the boards suggest, is to revise mortgage stress testing.

In January 2018, federal policymakers introduced mortgage stress testing for uninsured mortgages, which require a minimum downpayment of 20 percent.

The test requires borrowers to qualify at a rate either 200 basis points higher than what their lender is offering, or the Bank of Canada’s benchmark rate, whichever is higher.

The move drew widespread criticism from the real estate industry as it set a higher bar to homeownership. Similar stress testing had already been in place for insured mortgages since 2016.

While the Canadian housing market initially cooled down following the arrival of the new rules, since then markets including Toronto and Vancouver have shown renewed signs of life.

In August, for example, Greater Toronto Area home sales surged 13.4 percent while Greater Vancouver transactions soared 15.7 percent.

That may lead some to ponder why boards covering both regions are still signing off on proposing changes to the regulations.

But Aaron Vaillancourt, a Vancouver Island-based mortgage broker at Mortgage Architects, points out that annual sales increases don’t tell the full story.

“Even if we’re up year over year, there was such a precipitous fall in 2017 and 2018, when we start doing year over year comparisons and saying sales numbers are up or even prices are up, we have to remember what our baseline is,” Vaillancourt tells Livabl.

He also says that even though home sales are picking up, he’s seeing an increasing number of homebuyers co-buying, suggesting the stress test is still presenting challenges — people are just finding workarounds.

“The issue with it is it’s not reflective of the incomes that are servicing the debt,” he adds. “So when you add a co-signer, that parent isn’t necessarily going to be servicing the debt.”

And this gives certain homebuyers an unfair advantage over others.

“It becomes who has the best co-signer, and who has the best legacy of homeownership,” Vaillancourt adds, noting that people with parents who already own homes outright are more likely to be able to lend a hand.

Key Canadian Housing Markets are Recovering, But Realtors Still Say Mortgage Stress Tests are A Problem by Josh Sherman | Livabl

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