Conservative leader Andrew Scheersa国际传媒檚 pledge to extend mortgage amortization maximums for some homebuyers and loosen a contentious stress test would likely lead to more debt and higher property prices, some experts say.
sa国际传媒淥h my god, here we go again,sa国际传媒� said Tsur Somerville, a professor at the Sauder School of Business at the University of British Columbia, when he heard Scheersa国际传媒檚 announcement Monday.
Scheer plans to loosen rules around the stress test, which was designed to ensure buyers requiring mortgages could afford payments if interest rates rose, and remove it altogether for mortgage renewals.
He also plans to allow first-time property buyers to take out 30-year mortgages sa国际传媒� reversing moves by Stephen Harpersa国际传媒檚 previous Conservative government that reduced terms from 40 years to 25 years.
With a longer amortization, first-time homebuyers can opt for a larger mortgage than they might be able to afford payments on if it were for a shorter time frame. Meanwhile, lenders may be able to approve borrowers for larger mortgages if the stress test requirements are loosened.
The stress test sa国际传媒� introduced in 2010 and significantly modified in 2018 sa国际传媒� has helped to slow accelerating house prices, according to various reports.
The Canada Mortgage and Housing Corp. CEO Evan Siddall defended both measures amid industry lobbying for changes earlier this summer. In a strongly worded letter to the Standing Committee of Finance Siddall said his job is to sa国际传媒減rotect our economy from potentially tragic consequences.sa国际传媒�
The stress test has helped reduce house prices in Canada by 3.4 per cent compared to what they otherwise would have been, he said. The CMHC declined to comment Monday, saying they were not in a position to comment on political partiessa国际传媒� promises or announcements during the election period.
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A TD report released earlier this year estimated home prices could rise six per cent by the end of next year if the stress test was removed and all else remained equal.
Canadian Realtors cheered the proposal.
sa国际传媒淩ealtors have long asked for common-sense solutions designed to help Canadians purchase a home of their own,sa国际传媒� said Jason Stephen, the Canadian Real Estate Associationsa国际传媒檚 president, adding Scheersa国际传媒檚 campaign promises include some of their suggested policy changes.
The Scheer plan also includes launching an inquiry into money laundering in the real estate sector, as well as making surplus federal real estate available for development to increase housing supply.
The supply issue is Somerville was in favour of addressing, as increased supply tends to better affordability.
Canadianssa国际传媒� high level of household debt has been a concern. The CMHC previously warned that high debt levels with looming interest rate hikes could lead to lower consumption, less savings or loan defaults.
Canadians owed roughly $1.77 in credit market debt sa国际传媒� a figure that includes consumer credit, mortgages and non-mortgage loans sa国际传媒� for every dollar of their disposable income, according to Statistic Canadasa国际传媒檚 most recent figures.
sa国际传媒淚f wesa国际传媒檙e concerned about Canadianssa国际传媒� level of debt, why are we helping them take on more debt?sa国际传媒� asked Somerville.
Aleksandra Sagan, The Canadian Press
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