The real reason the government has introduced stringent mortgage stress testing, claims a mortgage broker, is because it wants Canadians to spend less money on mortgage payments and more on other segments of the economy.
“The government sees Canadians making their mortgage payments as a problem because they won’t spend their money in other sectors of the economy,” said Dustan Woodhouse. “If the economy contracts just a little bit, Canadians who have big mortgage payments will continue making them and won’t spend money elsewhere in the economy.”
The problem, according to Woodhouse, does not exist, but the government thinks it will.
“I really believe they’re trying to fix a problem that doesn’t exist. They’re fearful it will exist, but I genuinely believe the greatest threat to the Canadian economy and real estate sector is government overregulation. The government has made too many changes too fast. I’ve never seen government make changes at the pace they’re making them at, and with so little industry consultation. They’re not giving things time to settle in. I’m a little worried they’re pushing on the brake pedal harder than they realize.”
Moreover, the Office of the Superintendent of Financial Institution’s mandate, says Woodhouse, is to protect the stability of the banking system.
He also decried the scapegoating of foreign buyers, whom he says aren’t culpable for escalating unaffordability. With demand vastly outpacing supply, properties have become even hotter commodities than usual, and now the stress tests will put them even further out of reach.
“How is the government helping you by reducing your purchasing power by 20%, thereby reducing your ability to compete with foreign buyers—because foreign buyers don’t have to qualify under the same guidelines as you and I do,” he said. “You qualify for less today at a 3% interest rate than you could 15 years ago when it was 6%. This is the irony people don’t understand.”
Jennifer Souvanvong, a mortgage broker with Blue Pearl Mortgage Group, who’s licensed in Alberta and B.C., says she’s noticed restaurants and shops closing down in North Vancouver because it’s become too expensive.
“People can’t afford to live there because property values are too high, so shutting out buyers doesn’t make sense,” she said.
Ultimately, if B-20 backfires on the government Souvanvong says opposition parties will pounce and turn it into a hot-button issue in time for election season.
“Maybe the government backs off a bit if it negatively affects the real estate market,” said Souvanvong. “When election time comes this might be a hot topic. I think the opposition parties will use this as a platform because this affects everybody.”