Lending rules kill dreams of owning home, broker says

Dominion Lending Centres warns Ottawa against adding more even rigour to mortgage stress testing

Mortgage broker Dominion Lending Centres is warning the federal government that another round of lending restrictions will further stifle the home ownership dreams of Canadians and potentially stunt the economic contributions of the housing sector.

The company ran full-page newspaper ads on Tuesday asking Prime Minister Justin Trudeau and Finance Minister Bill Morneau to change mortgage rules that Dominion Lending says have “reduced the average Canadian family’s purchasing power by upwards of 20 per cent.”

“You’re forcing people . . . to go seek alternative financing . . . at a rate that is much higher.” GARY MAURIS DOMINION LENDING CENTRES CEO

CEO Gary Mauris said the ads and a website called, NewRulesHurt.ca, are being launched as the Office of the Superintendent of Financial Institutions (OSFI) is considering adding even more rigour to last year’s mortgage stress testing.

If that happens, applicants for uninsured mortgage, who have a 20 per cent down payment, will have to qualify at 2 per cent above the posted rate. It will make qualifying for a loan more difficult to a larger swath of Canadians, said Mauris.

Canadian default rates are among the lowest in the world, he said. OSFI head Jeremy Rudin said Tuesday that he expects to finalize lending guidelines by the end of the month and that they would take effect by the end of the year.

It would probably take about six months to see what expanded mortgage restrictions will do to homebuyers and the economy, but changes in the past year, including the introduction of a foreign buyer’s tax in Ontario, “had a substantial impact,” Mauris said.

“You’re in a market in Ontario where you see the reversal of a very strong economy in the housing sector that turned almost instantly. We expect to see substantial damage if and when they implement these stress tests on all mortgages fairly quickly,” he said.

First-time buyers and consumers wanting to re-finance their homes were hit hardest by the previous OSFI stress test on insured mortgage holders. “You’re forcing people who maybe have a sick relative, who have a student in university, . . . to go seek alternative financing from a secondary lender at a rate that is much higher than we previously get them,” Mauris said.

He’s taken his case to committees and MPs in Ottawa, but it’s difficult for the first-term Trudeau Liberals to admit they made a mistake last year, Mauris said.

“It was a reaction to two overheated housing markets, Vancouver and Toronto. It’s the equivalent of being a high school teacher and punishing the entire class for the misbehaviour of two students. They’re going to punish the entire country,” he said.

The market will adjust, but another round of stress testing will slow the economy further.

“We just wanted to remind the government that these changes they made 12 months ago are still having a significant impact,” Mauris said.

Dominion Lending Centres facilitated 61,000 mortgages last year and has 350 offices in Canada.

The company’s new website features stories from every province, who lost out on buying a home, were forced to consider alternative lenders or struggled to refinance a house to pay off other debts. They are the true stories of the mortgage broker’s real customers, Mauris said.