Canada’s new federal mortgage rules

FCPPI recently read the document released by the Frontier Centre for Public Policy titled, “Canada’s New Federal Mortgage Rules: Right Diagnosis, Wrong Medicine?” 

You can read the entire document here:  Canada’s New Mortgage Rules

I decided to write the author, Wendell Cox, and share my opinions with him.  I am now sharing them with you 🙂

Hi Wendell, I enjoyed reading your editorial above, and thought I would share my opinions with you.  First of all, with respect to the disconnect between the Feds intervention and the real problem vis-à-vis land use regulations in Vancouver and Toronto, your closing comment summed it up best: “The solution is in Vancouver and Toronto, not Ottawa”.  It raises the question, again, should CMHC be privatized?  If CMHC was privately owned and operated, like the other two default insurance providers, would the Feds be able to impose this type of policy?  I think not, which would leave policy control at the municipal and provincial levels, where it belongs.

Having said that, I don’t agree with the assertion that the new rules are affecting the wrong people.  There is no disputing the new rules will not impact homes purchased at $1M and above since they do not qualify for the default insurance.  But I don’t think the people buying homes above $1M fall into the same high risk category vis-à-vis total debt to income ratios.  Perhaps the Feds got this part right, and the people buying homes under $1M are the target group.  Your concerns about Alberta’s economy and the new rules are fair.  Yet another reason why this type of policy should be handled at the provincial and municipal levels.  But that doesn’t dismiss the need to rein in the high debt to income levels affecting most of the country, and targeting the consumer groups most guilty.

My own personal opinion, as someone who has worked in the mortgage industry since 1992, addressing total debt to income ratios should be done more directly.  Forget about tinkering with down payment restrictions.  The debt service ratios (GDSR and TDSR) would be a better alternative to focus on.  Also, blanket policy changes that paint everyone with the same brush are unfair.  First time home buyers are a different animal than move up buyers.  Refinancing represent a different risk than purchases.  I would like to see greater government consultation with our industry associations (i.e. Canadian Mortgage Brokers Association) on policy reform.  Now there’s a novel idea 🙂

Thanks for listening.

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