Let’s reduce the number of stress tests

Re Are current mortgage rules too strict? No, March 5 CMHC CEO Evan Siddall’s contribution to the Big Debate described the mortgage stress tests like Buckley’s cough syrup, as bitter medicine that was working. Siddall concedes that “some young Canadians are finding it harder to buy homes.”

The stress test reduces borrowing power by 15 per cent to 20 per cent. He then congratulates the policies for having created a 5.3 per cent reduction in house prices in Toronto.

For the aspiring middle class Canada needs, the net result is a home priced 10 per cent even further away from their ability to buy.

If you need an insured mortgage, homebuying is no more affordable today than it was before the stress tests. And yes, these may be more highly leveraged borrowers but first-time buyers always will be.

Isn’t this the cohort that the social mechanism of government-backed mortgage insurance is designed to promote?

As a reminder, these borrowers pay significant premiums to protect their lenders should they default, with $4 billion in profits going from CMHC to the federal government’s general accounts via a recently declared special dividend as proof.

Even the NDP — not normally associated with the mortgage industry — supports our recommendation for 30-year amortizations for first-time homebuyers, because, absent definedbenefit pensions the select few now have, Canada’s economy historically relies on young Canadians who can join the middle class via the growing equity (through repayment — not just continuous appreciation) in homes they own.

Our association has never asked for outright removal of the stress tests; we are reasonably asking for a reduction of them to better counter three Bank of Canada rate hikes in 2018.

Without some adjustments, homes will continue to be on sale for the wealthy and unattainable for the young middle class we promised to support. Paul Taylor, president and CEO of Mortgage Professionals Canada