After four long years of continuous policy failures by the Ottawa Liberals, Canadians are now finding it harder to achieve one of the single biggest assets for the middle-class: home-ownership.
In December of 2017, the Minister of Finance stealthily introduced a policy directive to certain crown corporations, including the Canadian Mortgage and Housing Corporation (CMHC), to pay the federal government any excess revenues on their books. The CMHC provides mortgage insurance to protect financial institutions from default if a homeowner can’t make their mortgage payments. Home buyers are required to purchase the coverage when they do not have a down payment of at least 20 percent on the purchase price of their home.
Fast forward to the Public Accounts documents for 2018, and we can see that the CMHC has paid over $5.6 Billion to the Government of Canada. Before last year, the CMHC has never paid the federal government. The CMHC is unnecessarily inflating the costs for mortgage insurance and are siphoning the excess profits into the hands of the Ottawa Liberals through special payments.
This means that Canadians like you are paying higher mortgage insurance rates for no reason other than to give more money to the Liberal government. We’re no longer going to be seeing a generation of young, first-time buyers entering into home ownership.
In January 2018, the Ottawa Liberals also introduced a set of new mortgage rules titled “B-20”. These new rules introduced a mandatory 2% stress test for all qualifying mortgages. This means that Canadians buying a home need to prove that they can afford mortgage payments based on their contract mortgage rate, plus two percentage points. This policy was supposedly introduced to protect Canada’s major banks and prevent households from taking on excessive debts. Liberal MPs have argued that this was to reduce real estate prices in major urban centres like Toronto and Vancouver, and because Canadians have taken on too much personal debt.
The Liberals have not only damaged the housing market and made it more difficult to sell your home or purchase one, they also completely ignore the reality that the issues around our high household debt is due to credit card spending, car loans and the such. Mortgage defaults are at a near all-time low, but the Liberals are attacking the wrong problem.
A side effect of B-20 is the banks raising their rates on mortgage renewals, knowing that Canadians can’t move to a competing bank because they won’t pass the new Liberal stress test.
This new stress test has lowered mortgage growth rates to 4% – the lowest in 17 years – and more and more middle-class buyers are being priced out of the market. Mortgage Professionals Canada has estimated that 150,000 Canadians have been prevented from buying a home due to the stress test. Bank of Canada has also estimated that the new rules will force people to save for an extra six years before buying.
As the Liberal changes continue to suppress the market, Canadians will see their positive equity fade away or their negative equity increase. What’s more, the economic slump spurred by the stress test is estimated to cost Canada about 200,000 jobs over the next three years.
These policy moves are a severely misguided attempt on the part of the Ottawa Liberals, and if they really care about Canadians, let alone first-time homebuyers and those who pay mortgages, they will look at the numbers and reverse these policies.