Conservatives’ plan to ease mortgage stress-test rules may raise debt and prices

Andrew Scheer vows to loosen rules around stress test and remove it altogether for mortgage renewals

Federal Conservative leader Andrew Scheer makes a campaign stop in Vaughan, Ont., on Monday, September 23, 2019. THE CANADIAN PRESS/Nathan Denette

Federal Conservative leader Andrew Scheer makes a campaign stop in Vaughan, Ont., on Monday, September 23, 2019. THE CANADIAN PRESS/Nathan Denette

Conservative leader Andrew Scheer’s pledge to extend mortgage amortization maximums for some homebuyers and loosen a contentious stress test would likely lead to more debt and higher property prices, some experts say.

“Oh my god, here we go again,” said Tsur Somerville, a professor at the Sauder School of Business at the University of British Columbia, when he heard Scheer’s announcement Monday.

Scheer plans to loosen rules around the stress test, which was designed to ensure buyers requiring mortgages could afford payments if interest rates rose, and remove it altogether for mortgage renewals.

He also plans to allow first-time property buyers to take out 30-year mortgages — reversing moves by Stephen Harper’s previous Conservative government that reduced terms from 40 years to 25 years.

With a longer amortization, first-time homebuyers can opt for a larger mortgage than they might be able to afford payments on if it were for a shorter time frame. Meanwhile, lenders may be able to approve borrowers for larger mortgages if the stress test requirements are loosened.

The stress test — introduced in 2010 and significantly modified in 2018 — has helped to slow accelerating house prices, according to various reports.

The Canada Mortgage and Housing Corp. CEO Evan Siddall defended both measures amid industry lobbying for changes earlier this summer. In a strongly worded letter to the Standing Committee of Finance Siddall said his job is to “protect our economy from potentially tragic consequences.”

The stress test has helped reduce house prices in Canada by 3.4 per cent compared to what they otherwise would have been, he said. The CMHC declined to comment Monday, saying they were not in a position to comment on political parties’ promises or announcements during the election period.

READ MORE: CMHC sets target to make housing affordable for every Canadian by 2030

A TD report released earlier this year estimated home prices could rise six per cent by the end of next year if the stress test was removed and all else remained equal.

Canadian Realtors cheered the proposal.

“Realtors have long asked for common-sense solutions designed to help Canadians purchase a home of their own,” said Jason Stephen, the Canadian Real Estate Association’s president, adding Scheer’s campaign promises include some of their suggested policy changes.

The Scheer plan also includes launching an inquiry into money laundering in the real estate sector, as well as making surplus federal real estate available for development to increase housing supply.

The supply issue is Somerville was in favour of addressing, as increased supply tends to better affordability.

Canadians’ high level of household debt has been a concern. The CMHC previously warned that high debt levels with looming interest rate hikes could lead to lower consumption, less savings or loan defaults.

Canadians owed roughly $1.77 in credit market debt — a figure that includes consumer credit, mortgages and non-mortgage loans — for every dollar of their disposable income, according to Statistic Canada’s most recent figures.

“If we’re concerned about Canadians’ level of debt, why are we helping them take on more debt?” asked Somerville.

Aleksandra Sagan, The Canadian Press

Like us on Facebook and follow us on Twitter

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Firefighters respond to a fire on Heatherly Road in Colwood Jan. 19. (Photo courtesy of View Royal Fire Rescue)
Two people escape injury in Colwood house fire

Heatherly Road fire started on a covered porch

December and January, so far, have seen their share of rain. (Black Press Media file photo)
Potential for snow in Greater Victoria after unusually wet December, January

Winter is on the way, says Environment and Climate Change Canada

Victoria police say the number of business break and enters in the city has been rising for the last four months. (Twitter/VicPD)
Business break and enters on the rise in Victoria

Sophisticated techniques used to defeat alarm systems, police say

A female prisoner sent Langford police officers a thank-you card after she spent days in their custody. (Twitter/West Shore RCMP)
Woman gives Victoria-area jail 4.5-star review in handwritten card to police after arrest

‘We don’t often get thank you cards from people who stay with us, but this was sure nice to see’: RCMP

Rendering offers an overhead view of proposed tiny home community using repurposed shipping containers in the Caledonia/Vancouver street parking lot next to Royal Athletic Park. Council voted to allow Aryze Developments apply for a temporary use permit as part of the project. (Courtesy Aryze Developments)
Anonymous donor boosts shipping container housing project in Victoria

Donor promises to match further donations until $500,000 goal is met

Provincial health officer Dr. Bonnie Henry prepares a daily update on the coronavirus pandemic, April 21, 2020. (B.C. Government)
B.C. adjusts COVID-19 vaccine rollout for delivery slowdown

Daily cases decline over weekend, 31 more deaths

Island Health chief medical officer Dr. Richard Stanwick receives a first dose of Pfizer vaccine, Dec. 22, 2020. (B.C. government)
B.C. turns to second doses of COVID-19 vaccine as supplies slow

Pfizer shipments down until February, to be made up in March

B.C.’s Ministry of Advanced Education and Skills Training announced funding to train community mental health workers at four B.C. post-secondary institutions. (Stock photo)
B.C. funding training of mental health workers at four post-secondary institutions

Provincial government says pandemic has intensified need for mental health supports

A health-care worker prepares a dose of the Pfizer-BioNTech COVID-19 vaccine at a UHN COVID-19 vaccine clinic in Toronto on Thursday, January 7, 2021. THE CANADIAN PRESS/Nathan Denette
No Pfizer vaccines arriving in Canada next week; feds still expect 4M doses by end of March

More cases of U.K. variant, South African variant found in Canada

Health-care workers wait in line at a UHN COVID-19 vaccine clinic in Toronto on Thursday, January 7, 2021. THE CANADIAN PRESS/Nathan Denette
Canadians who have had COVID-19 should still get the vaccine, experts say

Pfizer-BioNTech and Moderna vaccines were found to have a 95 per cent efficacy

An empty Peel and Sainte-Catherine street is shown in Montreal, Saturday, Jan. 9, 2021, as the COVID-19 pandemic continues in Canada and around the world. THE CANADIAN PRESS/Graham Hughes
Poll finds strong support for COVID-19 curfews despite doubts about effectiveness

The poll suggests 59 per cent remain somewhat or very afraid of contracting COVID-19

Egg producers in B.C. aren’t obligated to reveal their production sites. (Sarah Simpson/Citizen)
Officials say there’s not enough Vancouver Island eggs to meet demand

BC Egg Marketing Board doesn’t regulate labelling, supply needed from off-Island

A Courtenay resident labours to remove the snow build-up from around her car in February 2019. The area may see snow throughout the coming weekend. Black Press file photo
Snow, winter might not be done with Vancouver Island quite yet

Flurries, snow and cold temps predicted for the weekend for mid-Island

Most Read