{"id":11928,"date":"2019-03-18T11:11:13","date_gmt":"2019-03-18T18:11:13","guid":{"rendered":"http:\/\/www.roryc.ca\/blog\/?p=11928"},"modified":"2019-03-09T11:04:28","modified_gmt":"2019-03-09T19:04:28","slug":"canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2019\/03\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\/","title":{"rendered":"Canada’s Mortgage Stress Tests Are Hurting the Homebuyers & Economy"},"content":{"rendered":"

Economic researcher Will Dunning has a problem with the mortgage stress test the federal government imposed about a year ago.<\/p>\n

Actually, he has four.<\/p>\n

Last January, the Canadian government expanded its standard stress testing, which requires borrowers to qualify at a higher mortgage rate than they are signing on for. Before that, it only applied to insured mortgages. Mortgage insurance is needed if a homebuyer can\u2019t muster a downpayment of 20 percent or more, so previously, those who could managed to sidestep stress testing.<\/p>\n

1. The stress test ignores potential income growth<\/strong><\/p>\n

\u201cThe tests fail to consider the income growth that will occur by the time mortgages are renewed\u201d \u2014 that\u2019s Dunning\u2019s first issue, as outlined in his latest study.<\/p>\n

The point of the stress test is to makes sure borrowers are up to the task of making higher mortgage payments upon renewal, typically five years from signing on. So federally regulated lenders now need to make sure all borrowers can afford to pay the higher of the Bank of Canada\u2019s qualifying rate or the contract rate plus two percentage points.<\/p>\n

Problem is, this method ignores rising incomes. Borrowers\u2019 ability to make interest payments in five years is based on incomes today. Dunning notes that over the past five years, incomes have grown a cumulative 11.6 percent on average.<\/p>\n

2. It\u2019s also bad for the economy<\/strong><\/p>\n

\u201cThey have negative consequences for the broader economy,\u201d Dunning says, summing up his second issue.<\/p>\n

BMO suggests that the pace of residential construction has been slowing down as a the mortgage stress test has taken a bite out of homebuying activity. In fact, Canadian home sales were down 4 percent in January on a year-over-year basis, according to the Canadian Real Estate Association, which chalked up at least some of the decline to the stress tests.<\/p>\n

Dunning estimates that Canada will lose 90,000 to 100,000 jobs when the labour market fully adjusts to the slowdown in starts.<\/p>\n

3. Ditto for long-term best interests of Canadians<\/strong><\/p>\n

\u201cThey prevent Canadians from pursuing their long-term best interests,\u201d says Dunning as his third strike against the current test. After all, a mortgage is really \u201cforced savings,\u201d he says. Sure, in the short term a roughly 60-percent portion of mortgage payments are going towards interest, and initially renting is usually the cheaper option.<\/p>\n

But that changes over time. \u201cRents increase; for home ownership, the largest element of costs (the mortgage payment) is fixed (usually for the first five years). The total monthly cost of renting will rise more quickly than the cost of owning.\u201d<\/p>\n

4. Housing supply problems are going to intensify<\/strong>
\n\"\"<\/a>
\nBack to that slowdown in housing construction. Job losses aren\u2019t the only negative consequence of less home construction taking place. \u201cSuppressed production of new housing will worsen the shortages that have developed,\u201d Dunning warns.<\/p>\n

Dunning says construction needs to speed up, not slow down, to meet demand. The country\u2019s population has been increasing at a rate of 1.25 percent annually for the past three years, above the long-run average of 1.1 percent.<\/p>\n

\u201cLong-term, the stress tests will add to the pressures that Canadians are already experiencing in the housing market.\u201d<\/p>\n

Dunning, who describes himself online as an \u201ciconoclastic economist\u201d outlines what he says are four significantly harmful shortcomings of the stress testing.<\/p>\n

4 Problems with Canada’s Mortgage Stress Tests That Are Hurting Homebuyers & The Economy<\/a> by Josh Sherman | Livabl<\/p>\n","protected":false},"excerpt":{"rendered":"

Economic researcher Will Dunning has a problem with the mortgage stress test the federal government imposed about a year ago. Actually, he has four. Last January, the Canadian government expanded … [read more<\/a>]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"class_list":["post-11928","post","type-post","status-publish","format-standard","hentry","category-mortgage"],"yoast_head":"\nCanada's Mortgage Stress Tests Are Hurting the Homebuyers & Economy • Rory C Real Estate | Oakwyn Realty<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.roryc.ca\/blog\/2019\/03\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Canada's Mortgage Stress Tests Are Hurting the Homebuyers & Economy • Rory C Real Estate | Oakwyn Realty\" \/>\n<meta name=\"twitter:description\" content=\"Economic researcher Will Dunning has a problem with the mortgage stress test the federal government imposed about a year ago. Actually, he has four. Last January, the Canadian government expanded … [read more]\" \/>\n<meta name=\"twitter:image\" content=\"https:\/\/www.roryc.ca\/blog\/wp-content\/uploads\/2019\/03\/canadian-population-growth.jpg\" \/>\n<meta name=\"twitter:creator\" content=\"@RoryClipsham\" \/>\n<meta name=\"twitter:site\" content=\"@RoryClipsham\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Rory Clipsham\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/2019\\\/03\\\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/2019\\\/03\\\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\\\/\"},\"author\":{\"name\":\"Rory Clipsham\",\"@id\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/#\\\/schema\\\/person\\\/0672b9777e67473b9bd9247df49499c7\"},\"headline\":\"Canada’s Mortgage Stress Tests Are Hurting the Homebuyers & Economy\",\"datePublished\":\"2019-03-18T18:11:13+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/2019\\\/03\\\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\\\/\"},\"wordCount\":568,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/#\\\/schema\\\/person\\\/0672b9777e67473b9bd9247df49499c7\"},\"image\":{\"@id\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/2019\\\/03\\\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/wp-content\\\/uploads\\\/2019\\\/03\\\/canadian-population-growth-288x177.jpg\",\"articleSection\":[\"Mortgage\"],\"inLanguage\":\"en-CA\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/2019\\\/03\\\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\\\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/2019\\\/03\\\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\\\/\",\"url\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/2019\\\/03\\\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\\\/\",\"name\":\"Canada's Mortgage Stress Tests Are Hurting the Homebuyers & Economy • Rory C Real Estate | Oakwyn Realty\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/2019\\\/03\\\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/2019\\\/03\\\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/wp-content\\\/uploads\\\/2019\\\/03\\\/canadian-population-growth-288x177.jpg\",\"datePublished\":\"2019-03-18T18:11:13+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/2019\\\/03\\\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\\\/#breadcrumb\"},\"inLanguage\":\"en-CA\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/2019\\\/03\\\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-CA\",\"@id\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/2019\\\/03\\\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\\\/#primaryimage\",\"url\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/wp-content\\\/uploads\\\/2019\\\/03\\\/canadian-population-growth.jpg\",\"contentUrl\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/wp-content\\\/uploads\\\/2019\\\/03\\\/canadian-population-growth.jpg\",\"width\":713,\"height\":438},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/2019\\\/03\\\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Canada’s Mortgage Stress Tests Are Hurting the Homebuyers & Economy\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/#website\",\"url\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/\",\"name\":\"Rory C Real Estate | Oakwyn Realty\",\"description\":\"Rory C Real Estate Updates | Home Selling & Buying\",\"publisher\":{\"@id\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/#\\\/schema\\\/person\\\/0672b9777e67473b9bd9247df49499c7\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-CA\"},{\"@type\":[\"Person\",\"Organization\"],\"@id\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/#\\\/schema\\\/person\\\/0672b9777e67473b9bd9247df49499c7\",\"name\":\"Rory Clipsham\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-CA\",\"@id\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/wp-content\\\/uploads\\\/2019\\\/10\\\/RoryC-white-w-tagline.jpg\",\"url\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/wp-content\\\/uploads\\\/2019\\\/10\\\/RoryC-white-w-tagline.jpg\",\"contentUrl\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/wp-content\\\/uploads\\\/2019\\\/10\\\/RoryC-white-w-tagline.jpg\",\"width\":504,\"height\":504,\"caption\":\"Rory Clipsham\"},\"logo\":{\"@id\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/wp-content\\\/uploads\\\/2019\\\/10\\\/RoryC-white-w-tagline.jpg\"},\"sameAs\":[\"http:\\\/\\\/www.roryc.ca\\\/\",\"https:\\\/\\\/www.facebook.com\\\/pg\\\/BurnabyandCoquitlamHomes\\\/about\\\/?ref=page_internal\",\"https:\\\/\\\/www.instagram.com\\\/roryclipshamhomes\\\/\",\"https:\\\/\\\/x.com\\\/RoryClipsham\"]}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Canada's Mortgage Stress Tests Are Hurting the Homebuyers & Economy • Rory C Real Estate | Oakwyn Realty","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.roryc.ca\/blog\/2019\/03\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\/","twitter_card":"summary_large_image","twitter_title":"Canada's Mortgage Stress Tests Are Hurting the Homebuyers & Economy • Rory C Real Estate | Oakwyn Realty","twitter_description":"Economic researcher Will Dunning has a problem with the mortgage stress test the federal government imposed about a year ago. Actually, he has four. Last January, the Canadian government expanded … [read more]","twitter_image":"https:\/\/www.roryc.ca\/blog\/wp-content\/uploads\/2019\/03\/canadian-population-growth.jpg","twitter_creator":"@RoryClipsham","twitter_site":"@RoryClipsham","twitter_misc":{"Written by":"Rory Clipsham","Est. reading time":"3 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.roryc.ca\/blog\/2019\/03\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\/#article","isPartOf":{"@id":"https:\/\/www.roryc.ca\/blog\/2019\/03\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\/"},"author":{"name":"Rory Clipsham","@id":"https:\/\/www.roryc.ca\/blog\/#\/schema\/person\/0672b9777e67473b9bd9247df49499c7"},"headline":"Canada’s Mortgage Stress Tests Are Hurting the Homebuyers & Economy","datePublished":"2019-03-18T18:11:13+00:00","mainEntityOfPage":{"@id":"https:\/\/www.roryc.ca\/blog\/2019\/03\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\/"},"wordCount":568,"commentCount":0,"publisher":{"@id":"https:\/\/www.roryc.ca\/blog\/#\/schema\/person\/0672b9777e67473b9bd9247df49499c7"},"image":{"@id":"https:\/\/www.roryc.ca\/blog\/2019\/03\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\/#primaryimage"},"thumbnailUrl":"https:\/\/www.roryc.ca\/blog\/wp-content\/uploads\/2019\/03\/canadian-population-growth-288x177.jpg","articleSection":["Mortgage"],"inLanguage":"en-CA","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/www.roryc.ca\/blog\/2019\/03\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\/#respond"]}]},{"@type":"WebPage","@id":"https:\/\/www.roryc.ca\/blog\/2019\/03\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\/","url":"https:\/\/www.roryc.ca\/blog\/2019\/03\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\/","name":"Canada's Mortgage Stress Tests Are Hurting the Homebuyers & Economy • Rory C Real Estate | Oakwyn Realty","isPartOf":{"@id":"https:\/\/www.roryc.ca\/blog\/#website"},"primaryImageOfPage":{"@id":"https:\/\/www.roryc.ca\/blog\/2019\/03\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\/#primaryimage"},"image":{"@id":"https:\/\/www.roryc.ca\/blog\/2019\/03\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\/#primaryimage"},"thumbnailUrl":"https:\/\/www.roryc.ca\/blog\/wp-content\/uploads\/2019\/03\/canadian-population-growth-288x177.jpg","datePublished":"2019-03-18T18:11:13+00:00","breadcrumb":{"@id":"https:\/\/www.roryc.ca\/blog\/2019\/03\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\/#breadcrumb"},"inLanguage":"en-CA","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.roryc.ca\/blog\/2019\/03\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\/"]}]},{"@type":"ImageObject","inLanguage":"en-CA","@id":"https:\/\/www.roryc.ca\/blog\/2019\/03\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\/#primaryimage","url":"https:\/\/www.roryc.ca\/blog\/wp-content\/uploads\/2019\/03\/canadian-population-growth.jpg","contentUrl":"https:\/\/www.roryc.ca\/blog\/wp-content\/uploads\/2019\/03\/canadian-population-growth.jpg","width":713,"height":438},{"@type":"BreadcrumbList","@id":"https:\/\/www.roryc.ca\/blog\/2019\/03\/canadas-mortgage-stress-tests-are-hurting-the-homebuyers-economy\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.roryc.ca\/blog\/"},{"@type":"ListItem","position":2,"name":"Canada’s Mortgage Stress Tests Are Hurting the Homebuyers & Economy"}]},{"@type":"WebSite","@id":"https:\/\/www.roryc.ca\/blog\/#website","url":"https:\/\/www.roryc.ca\/blog\/","name":"Rory C Real Estate | Oakwyn Realty","description":"Rory C Real Estate Updates | Home Selling & Buying","publisher":{"@id":"https:\/\/www.roryc.ca\/blog\/#\/schema\/person\/0672b9777e67473b9bd9247df49499c7"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.roryc.ca\/blog\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-CA"},{"@type":["Person","Organization"],"@id":"https:\/\/www.roryc.ca\/blog\/#\/schema\/person\/0672b9777e67473b9bd9247df49499c7","name":"Rory Clipsham","image":{"@type":"ImageObject","inLanguage":"en-CA","@id":"https:\/\/www.roryc.ca\/blog\/wp-content\/uploads\/2019\/10\/RoryC-white-w-tagline.jpg","url":"https:\/\/www.roryc.ca\/blog\/wp-content\/uploads\/2019\/10\/RoryC-white-w-tagline.jpg","contentUrl":"https:\/\/www.roryc.ca\/blog\/wp-content\/uploads\/2019\/10\/RoryC-white-w-tagline.jpg","width":504,"height":504,"caption":"Rory Clipsham"},"logo":{"@id":"https:\/\/www.roryc.ca\/blog\/wp-content\/uploads\/2019\/10\/RoryC-white-w-tagline.jpg"},"sameAs":["http:\/\/www.roryc.ca\/","https:\/\/www.facebook.com\/pg\/BurnabyandCoquitlamHomes\/about\/?ref=page_internal","https:\/\/www.instagram.com\/roryclipshamhomes\/","https:\/\/x.com\/RoryClipsham"]}]}},"_links":{"self":[{"href":"https:\/\/www.roryc.ca\/blog\/wp-json\/wp\/v2\/posts\/11928","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.roryc.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.roryc.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.roryc.ca\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.roryc.ca\/blog\/wp-json\/wp\/v2\/comments?post=11928"}],"version-history":[{"count":1,"href":"https:\/\/www.roryc.ca\/blog\/wp-json\/wp\/v2\/posts\/11928\/revisions"}],"predecessor-version":[{"id":11930,"href":"https:\/\/www.roryc.ca\/blog\/wp-json\/wp\/v2\/posts\/11928\/revisions\/11930"}],"wp:attachment":[{"href":"https:\/\/www.roryc.ca\/blog\/wp-json\/wp\/v2\/media?parent=11928"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.roryc.ca\/blog\/wp-json\/wp\/v2\/categories?post=11928"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.roryc.ca\/blog\/wp-json\/wp\/v2\/tags?post=11928"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}