Does Canada Still Need The Mortgage Stress Test?

Photo by Matthew Henry from Burst

Would-be buyers are often shut out of the market – despite having that 20 per cent down payment sitting in their savings account. The mortgage stress test ebbs and flows with the interest rates, but it has had a huge impact on Canada’s housing market. So it’s no surprise affordable housing and revisions on the mortgage stress test have become key election issues.

But according to the National Bank of Canada’s chief executive officer Louis Vachon, federal party candidates need to pause before making any major changes to housing policies.

“The so-called B-20 rule has been put in place now [for] almost a year,” Louis Vachon said in a Wednesday interview with BNN Bloomberg. “I think we need to give a little bit more time to go by to assess how it’s impacting different markets in different parts of the country.”

READ: Single-Family Home Sales Skyrocket In Toronto Despite Stress Test

Like John Ivison in a recent National Post article, Vachon cautions residents against politician shopping for votes –  it may just destabilize the market.

“I keep repeating that all the time, especially to foreign investors: There is no such thing as the Canadian real estate market,” he said.

“Canada is so big and there are big differences between what’s going on in Vancouver, Montreal and Toronto, or the western provinces. So, you really have to look at different markets.”

READ: OREA Calls Stress Test ‘Disastrously Flawed,’ Urges Policy Be Changed

Last month, the Canadian Real Estate Association reported a 0.6 per cent month-over-month rise in housing unit sales. That’s a 16 per cent rise nationally compared to last year.

The mortgage stress tests put in place by the Office of the Superintendent of Financial Institutions took hold at the beginning of 2018. Conservative leader Andrew Scheer pledged last month to ease rules around the test, including allowing first-time property buyers to take out 30-year mortgages. Is that his plea for millennial votes?

Meanwhile, Vachon believes that the density of urban centres should be spread out more. Sadly, the trend of Canadians migrating to cities for employment purposes has been going on for over 100 years.

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Does Canada Still Need The Mortgage Stress Test?

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