Feeling the squeeze, Canada’s home builders are urging the federal government to loosen mortgage-lending restrictions that were put in place to cool the housing markets.
Banks require even those with a 20 per cent down payment, who don’t need mortgage insurance, to prove that they can make payments at 2 percentage points above the contracted rate. The so-called B-20 stress tests already existed for insured mortgages. By April, the average home price in Toronto had tumbled 12 per cent from the same month the prior year, though has since stabilized.
There is a feeling that these restrictions are affecting young first-time buyers and the longer the rules are in place the more disenfranchised that age cohort is going to be. The stress tests also perversely tend to push people into open variable rate mortgages or the non-regulated space, which is bad for everyone if the economy goes south.
A reduction to 1.5 per cent or 1 per cent is being urged. -CINEWS