Buyers, brokers and lenders can be forgiven if they see the federal government’s attitude toward mortgages heading in two different directions at once. The federal housing agency is calling for one thing while the Bank of Canada appears to be clearing the way for the opposite.
Earlier this month the CEO of Canada Mortgage and Housing Corporation, Evan Siddall, sent a letter to banks, mortgage lenders and private mortgage insurers calling on them to tighten their requirements for borrowers. He asked lenders to stop offering higher-risk mortgages to over-leveraged first-time buyers in the name of Canada’s future economic health and for the sake of CMHC itself.
“We are approaching a level of minimum market share that we require to be able to protect the mortgage market in times of crisis,” Siddall wrote, adding that CMHC requires the support of lenders to prevent “further erosion of our market presence.”
While CMHC is calling for stricter standards the Bank of Canada has just relaxed its mortgage stress test requirements for the third time since the pandemic started. The qualifying rate has been dropped by 15 basis points to 4.79%. That is about $7,500.00 more purchasing power for a well-qualified, high-ratio borrower. It is probably not enough to clear the barriers to entry, but it would certainly help with closing costs.