Tighter mortgage rules ahead, say economists

Some 10 of 14 economists and strategists surveyed for Reuter’s first poll on the Canadian housing sector last week said Ottawa does, indeed, seem poised to tighten mortgage rules within the next 12 months.

 

Moreover, they believe that intervention is likely to come as early as the busy spring season.

That opinion may be reflected in their projections for home prices this year, with respondents predicting a mere 0.1 percent climb for this year and again in 2013. That’s down from last year’s near-1 per cent price growth.

The poll results may only add to broker concerns that the federal government is planning to reduce the maximum amortization for CMHC-insured mortgages to 25 years instead of the current 30.

Brokers are already concerned that the CMHC has effectively moved to discourage lenders from growing their business-for-self portfolios.

Earlier this month, the Crown corporation warned lenders they’ll face increasingly limited access to bulk insurance for their conventional loans as the CMHC’s $600 billion fund comes within 10 per cent of its government-set ceiling. At the same time, documents from the Office of the Superintendent of Financial Institutions revealed the regulator’s concerns over mortgage lending for self-employeds and lender underwriting standards on those loans.

Economists polled by Reuters are suggesting more formal rule changes are in the works. Industry analysts are betting on that chop in the amortization cap and/or an increase in the cost of mortgage insurance.

CAAMP is now actively lobbying against any such move, with its CEO twice travelling to Ottawa this month to deliver that message to Finance committee members in person.

It has also crafted a new industry report documenting what could well be at stake with further tightening of the country’s mortgage rules --  detailing the economic impact of the housing and mortgage industry.

“We want the government to be aware of the economic and job contribution that housing and the real estate industry provide,” said CAAMP CEO Jim Murphy, coming off a second visit to Parliament Hill. ”CAAMP, based on current data and research, sees no need to further tighten or restrict access to residential mortgages at this time.”

The new report by CAAMP Chief Economist Will Dunning is bringing that point home by identifying all the ways that the Canadian housing sector is a significant economic driver.

Housing and mortgage activities, along, “could account for more than 1.35 million direct and indirect jobs about 8 per cent of total Canadian employment,” writes Dunning. “The housing and mortgage industry has been particularly important to job creation these past five years.”

The report estimates that from 2006 to 2011, 18 per cent of all job creation occurred as a direct and indirect result of growth in the housing and mortgage sector.

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