Mortgage rules lower number of home buyers

Study is needed to see how changes affect the market, Tom Kmiec writes

Despite espousing to be great champions of the middle class, the Ottawa Liberals don’t seem too concerned with one of the most significant cost-of-living issues currently facing Canadian families: their mortgages.

That is the message the Liberals sent to Canadians when they voted down, on two separate occasions, motions before Parliament’s finance committee that would have studied the effects of the most recent, and drastic, changes to federal mortgage rules.

On May 30, I forced debate on my motion to study recently implemented mortgage changes at the finance committee. Refusing to speak to my motion, every Liberal MP voted down the proposal to study a defining issue facing middle-class Canadians.

Not satisfied with the Liberals’ refusal to take seriously the concerns of Canadians struggling with their mortgages, I tabled a second motion on June 13, this time asking for a new subcommittee to be created that would study these new mortgage rules. Again, the Liberals said no, but at least debated the issue.

Dysfunction in the housing market has become the favourite justification for governments looking to change mortgage rules, but what happens when politicians meddle?

In January, the Liberals, through the office of the superintendent of financial institutions, introduced a set of new rules. Among other changes, these rules introduced a mandatory stress test for all qualifying mortgages, meaning that homeowners would have to demonstrate they could accommodate a two percentage point increase in the amount they pay.

Six months into 2018 and the harmful effects of these mortgage changes have already been realized. A recent CBC article reported that more than 100,000 Canadians would fail the stress test, and that 50,000 Canadians would be blocked from purchasing a home.

Imagine tens of thousands of Canadians having home ownership yanked from their grasp. That is the reality that these changes have created. Canadians in every region of the country are feeling the pinch.

Data provided by Mortgage Professionals Canada, the national housing lenders’ industry association, indicates that up to 20 per cent more mortgages are being denied by big banks since these changes were implemented, and this huge dip in economic activity has caused the Bank of Canada to post the lowest mortgage growth in Canada since 2001.

History books tell us of the danger that can arise when governments neglect to enforce sufficiently stringent lending rules on financial institutions. It was under the last Conservative government that Canadian banks — with strict oversight — weathered the 2009 financial crisis better than any other G7 country.

However, regulation for the sake of regulation — or worse, misplaced regulation — is not good public policy. Regardless of the intentions behind these new mortgage changes, the impact has been catastrophic. Outside of the decimated real estate market, the far-reaching impact of these changes is also having an economywide effect, with as many as 150,000 fewer jobs predicted, according to Mortgage Professionals Canada.

The refusal on the part of the Liberals to study this issue should not be surprising. Over the past three years, Canadians have seen this Liberal government take an Ottawa-knows-best approach to nearly every issue — with the housing market as no exception.

The Liberals have introduced more than a dozen regulatory changes to mortgage rules in three years, which evidently are not achieving much in terms of improving affordability or stability in the market.

Without the benefit of a comprehensive study, the true impact of these rule changes may never be known. However, when market indicators show home sales plummeting by as much as 20 per cent, and huge segments of the population being forced out of the housing market, logic would indicate that further study is warranted.

That’s precisely what I have asked for: an opportunity to study the effects of the mortgage rules on Canadian families. Sadly, the Liberals aren’t in favour of getting more evidence.