Shawn Stillman<\/a>, principal of Mortgage Outlet, a 30-year amortization on high-ratio mortgages wouldn\u2019t solve the issues surrounding housing affordability, which the NDP is putatively trying to do with its proposal. For starters, housing supply isn\u2019t commensurately increasing with demand, and Stillman says that\u2019s the crux of Canada\u2019s housing crisis.<\/p>\n\u201cWe\u2019ve had a massive amount of immigration to Canada, which the country undoubtedly needs, but the housing stock should keep up and hasn’t,\u201d he said. \u201cNobody ever wants to say this but you can\u2019t increase demand without looking at supply, and no one will ever want to say that we should cut down immigration because they will be deemed to be a racist or discriminatory, even though that isn’t necessarily the case, but no matter what happens, even if you did a 30-year amortization, in reality it will make no change on affordability because prices will just keep going up.\u201d<\/p>\n
Laura Martin, COO of Matrix Mortgage Global, disagrees with Stillman\u2019s assessment and says that the real barrier to enter a high-ratio mortgage has always been income qualification. While not wholly a panacea, stretching the amortization by five years would alleviate some pressure on homebuyers, she says.<\/p>\n
\u201cUsing immigration as a scapegoat for the lack of affordability totally fails to account for how and why prices skyrocketed while the borders were closed, not to mention overlooking the fact that the overwhelming majority of immigrants admitted to Canada who are not from the U.S. or U.K. are working in low-to-medium paying jobs like manufacturing, healthcare, elderly care, retail and so forth,\u201d she said.<\/p>\n
Martin says that on a $600,000 mortgage at 2.5% interest with a 30-year amortization, the monthly payment is $2,366.70, which can be supported by a $96,000 annual income at a 35% gross debt service (GDS) threshold. That same mortgage on a 25-year amortization, however, would require an annual income of $108,000 to reach 35% GDS.<\/p>\n
\u201cRaising the amortization to 30 years, as it has been for decades before, will help both new Canadians and citizens become homeowners,\u201d said Martin.<\/p>\n
On the question of solving Canada\u2019s housing crisis, Stillman is even more critical of the NDP\u2019s proposal to raise the minimum wage to $20 because it will trigger higher inflation and, by extension, housing prices.<\/p>\n
\u201cWhen you increase the minimum wage, every other wage goes up along with it,\u201d he said. \u201cIf you bring it to $20, inflation will go up. Everybody moves up. Socialism is a beautiful theory but in reality it doesn\u2019t work. If you artificially raise the floor, everything else rises too. Nobody in Canada buys homes for anything less than within 5-10% of their maximum affordability, so this will cause more housing price inflation. Those same people who get 25-year amortizations buying the maximum house they can afford would be able to do a 30-year amortization and they\u2019ll all be fighting over the same housing, and prices will rise to match that.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
With the federal election looming on September 20, the NDP have proposed reintroducing a 30-year amortization on high-ratio mortgages, but the president of Mortgage Architects has an even more radical idea. \u201cPersonally, I was lobbying for a 50-year amortization for first-time homebuyers, if you want to stimulate the economy and get young homebuyers into the […]<\/p>\n","protected":false},"author":6,"featured_media":28033,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4],"tags":[],"acf":[],"_links":{"self":[{"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/posts\/9279"}],"collection":[{"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/comments?post=9279"}],"version-history":[{"count":4,"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/posts\/9279\/revisions"}],"predecessor-version":[{"id":28034,"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/posts\/9279\/revisions\/28034"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/media\/28033"}],"wp:attachment":[{"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/media?parent=9279"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/categories?post=9279"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/tags?post=9279"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}