Why scrapping the mortgage stress test is a bad idea GlobeMoney
The federal government’s mortgage stress test was designed to ensure borrowers and lenders would be okay in a world of higher interest rates.
Unfortunately, the argument is a little too self-serving. What really worries real estate agents, mortgage brokers, home builders and developers is the cooling housing market. The boom of recent years has been great for business, and no one wants it to end.The surest way to make an asset cheaper is to let a market crash. So if these new apostles of affordability truly believe the stress test is killing the housing market, prospective home buyers are in for a treat.
Bank of Canada Governor Stephen Poloz insists the stress test isn’t a prohibitive barrier. Buyers can choose to buy smaller homes in a less pricey neighbourhood if they can’t afford a mortgage. And sellers can always lower asking prices if buyers aren’t biting. It’s also not obvious that Canada is facing a home-ownership crisis. The rates of home ownership for all Canadians, and millennials in particular, are substantially higher than in most other developed countries, including the United States, according to a recent report by Royal Bank of Canada economist Robert Hogue. Even in the priciest Canadian cities, Toronto and Vancouver, ownership rates are high by international standards.
Indeed, most industry groups are proposing variations on these various solutions in their pitches to Finance Minister Bill Morneau as he puts the finishing touches on his March 19 budget.
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