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Hurt by New Mortgage Rules? You’re Not Alone M
isery loves company, and a problem shared is a problem halved. At least, that’s the thinking behind a new website that has recently been launched by a group of mortgage brokerages and other lending companies – newruleshurt.ca. The website shares numerous real-life examples of ways in which Canadians have been pushed out of the housing market because of onerous new mortgage qualification rules launched by the federal government last year. Known as the “stress test,” the rules require new mortgage applicants with less than a 20 per cent down payment to qualify at the Bank of Canada posted rate, no matter what their contracted interest rate is. This means affected applicants typically qualify for around 20 per cent less mortgage than previously, meaning that many cannot get a mortgage for the
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house that they want or need, according to mortgage brokers. The website says, “Through no fault of their own and without any warning, these prospective homebuyers were cruelly forced to alter, and in many cases, abandon their dreams of homeownership.” Dominion Lending Centres, Mortgage Architects, The Mortgage Centre and Mortgage Professionals Canada jointly set up the website to highlight the extent of real-life cases in which prospective home buyers have been hurt by the new rules. Vocal Objections Dominion Lending Centres has been particularly vocal in its objections to the new rules, and earlier in the year made an impassioned submission to the federal Standing Committee on Finance to plead for a softening of the stress test.
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DLC wrote in its brief: “All new mortgages [with a down payment of less than 20 per cent] now need to qualify at the greater of either the Bank of Canada posted rate (4.64 per cent) or the contract rate. The net effect on first-time home buyers is that their purchasing power has been reduced by upwards of 20 per cent, which has significant impacts on many marginal buyers. Not only does the stress test reduce purchasing power, it makes housing less, rather than more affordable.” At the committee hearing, Dan Albas, Conservative MP for Central OkanaganSimilkameen-Nicola, said that many of his constituents were feeling the negative impact from the policy. “I’ve had people from around my riding, especially young people, who have felt that they were on a good path towards home ownership and, because
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of these rule changes, that’s been pushed back. “Most of us would agree that home ownership has served Canadians quite well, and people can store away equity over the long term. This policy is preventing young people from having the benefits of home ownership enjoyed by 69 per cent of Canadians.” The objective of the new website is to use real-life examples of hardships created by the stress test to persuade the federal government to amend the rules. The group recommends, among other changes, “a more modest benchmark rate that sits halfway between the Bank of Canada posted rate and the current contract mortgage rate.” Home buyers who have experienced similar struggles are encouraged to anonymously submit their own stories at newruleshurt.ca/submit-your-story/.
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