Govt Leaves Mortgage Rules Alone
Investors hoping for a spike in rental demand will be disappointed with the government’s decision to keep mortgage insurance rules as they are — the Finance minister offering a budget that does nothing to tighten qualifying terms for potential home buyers.
While moving to cut 19,200 bureaucratic jobs over the next three years with an eye toward slashing $5 billion a year from the federal budget, Jim Flaherty left the current regime of mortgage rules in place.
The reprieve, at least for now, was anticipated by mortgage industry leaders from one end of the country to the next, but effectively denies landlords any increase in demand for their units resulting from stricter qualifying standards for home buyers.
It means rent increases are also unlikely.
With today’s budget announcement, Flaherty effectively rejected a chorus of banker calls for a 25-year amortization cap, down from the 30 years the government now allows. Some economists also wanted the government to increase down payment requires to a minimum 7- or 10-per cent.
Both suggestions were billed as a way of cutting record levels of household debt and slow down the consumer rush to buy homes.
Exactly a week prior to Thursday’s communiqué, Flaherty used a media scrum to suggest he would resist calls for stricter rules.
“I find it a bit off that some of the bank executives are taking the position that the Minister of Finance or the government somehow should tell them how to run their business,” Jim Flaherty told reporters just outside Ottawa Thursday. “They decide what they want to charge in interest rates.
“The new housing market produces a lot of jobs in Canada so there’s a balance that needs to be addressed.”
Still, The government did move to shore up some areas of mortgage industry oversight: it will bring in legislation to provide increased oversight of CMHC commercial activities; and legislation for covered bonds, which will be administered by CMHC.