Mortgage industry urges Ottawa to tackle housing affordability, takes aim at homebuyer incentive

Mortgage Professionals Canada recommendations include letting first-time homebuyers get mortgage terms of up to 30 years

A group representing Canada’s mortgage industry said Monday that the federal government has failed to address Canada’s housing affordability problem and urged policy-makers to consider a series of recommendations that would help first-time home buyers in particular.

Mortgage Professionals Canada, which represents mortgage brokers, lenders, insurers and service providers, called on Ottawa to implement the Liberal party’s campaign pledge to increase the cut-off for insurable mortgages to $1.25 million from $1 million, and to tie that level to inflation to keep up with rising prices. The move would mean more mortgages qualify for insurance and would not require a full 20 per cent down payment.

The group also wants first-time homebuyers to have access to mortgage terms of up to 30 years for insured mortgages and recommended making mortgage qualification stress tests consistent for both insured and uninsured mortgages, setting the stress test level to two percentage points above the contract rate.

“To our first point, increasing the mortgage insurance cap to $1.25 million and including it on an ongoing basis was sensible enough to be an election promise made by both the current government and the Opposition last year,” MPC chair Joe Pinheiro said during a news conference.

“As most Canadians know, valuations have only increased since the average townhouse in the very urban centres in Canada are well over a million dollars today.… For a young growing family — especially ones trying to do it themselves — to amass $200,000 or $250,000 to qualify for the space they need is a huge task.”

The organization also criticized the First-Time Home Buyers Incentive program, a shared-equity program launched in September 2019 that offers five per cent toward the down payment for a first-time buyer’s purchase of an existing resale home, or 10 per cent for a newly constructed home.

“The government’s well-intended current First-Time Home Buyers Incentive program, whereby first-time homebuyers can obtain an equity mortgage from the government, is simply failing,” said MPC vice chair Veronica Love during the news conference.

Love added the program is falling short because of the added legal costs during transaction closing. She said the qualifying criteria is too restrictive for most first-time homebuyers, further arguing that if homebuyers can qualify for the program, they would likely be able to qualify without the incentive as well. Love also said that “almost all clients dislike the idea of becoming a co-homeowner with the government, if they can avoid it.”

“Most recent data shows that the First-Time Home Buyer Incentive program participation is less than one-third of the government’s stated initial goal,” Love said. “An insurable 30-year amortization can accomplish at least the same outcome as the first-time homebuyer program promotes: reduced monthly payments for buyers, but without the complexity of two mortgages and increased legal costs to buy and sell the home.”

The group said in a release that it would continue working with members of Parliament and policy-makers throughout the week.

The spring federal budget is on the horizon, and MPC chief executive Paul Taylor told the Financial Post he hopes to see policy solutions that address both demand and supply, as opposed to focusing largely on policy that tamps down demand.

“If we had historically equally considered the demand-side and supply-side policies, we probably would be in a far better position,” Taylor said. “It’s just we’ve had a very sole focus, I would say, from a policy perspective on the demand side.”

Home prices across Canada soared to new heights over the pandemic, bringing the average price of a home up to $816,720 in February, according to data from the Canadian Real Estate Association.

Source: https://financialpost.com