A report by Mortgage Professionals Canada says new federal government policies are suppressing housing activity in the country.
The Report on the Housing and Mortgage Market in Canada, which was released on Wednesday, also said the overall strength of consumer sentiment has been weakened by increasing interest rates and the new rules making it more difficult for homebuyers to secure mortgage financing.
“We are still seeing a high level of desire in homebuying, especially among young people aged 25-34,” said Paul Taylor, president and CEO of Mortgage Professionals Canada, in a statement. “Whether they will be able to make that purchase may be an entirely different matter.”
More and more young people are getting used to the idea that they may never own a home and become permanent renters, according to the report.
“We support a stress test, albeit at a reduced rate of 0.75 per cent, as it is a useful tool to test a borrower’s ability to make future payments,” said Taylor. “However, the cumulative impact of rising rates, a two per cent or greater stress test, provincial government rules in Ontario and British Columbia, and further lending restrictions are negatively suppressing housing activity not just in Toronto and Vancouver, but throughout the country.”
The report said homebuying trends have been disrupted by stress tests and there is now an imbalance between supply and demand in almost every region of the country.
Will Dunning, chief economist with Mortgage Professionals Canada and the author of the report, said the effects of these policies are especially concerning in areas that are already dealing with economic instability, notably Alberta, Saskatchewan and Newfoundland and Labrador, which are struggling to recover from the oil price shock.
“The worsening divide between housing supply and housing demand is further degrading the confidence consumers have in the economy and in housing,” added Dunning.
Mortgage Professionals Canada is the national mortgage industry association representing 11,500 individuals and 1,000 companies, including mortgage brokerages, lenders, insurers and industry service providers.
Respected business writer Mario Toneguzzi is a veteran Calgary-based journalist who worked for 35 years for the Calgary Herald in various capacities, including 12 years as a senior business writer.
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