Finance Minister Bill Morneau says borrowing has been dampened by last October mortgage rule changes.
But despite a report urging Ottawa to examine ways of fostering support the Minister ruled out any steps along those lines, expressing concern that increased house prices would encourage.
The comments are a part of a current letter from Mr. Morneau into the House of Commons finance committee, which had published a wide-ranging report on home in April.
Four policy changes were declared by the government in response to concern over rising house prices in Toronto and Vancouver.
The modifications included a strain evaluation for all mortgages that were new to make sure that home buyers would qualify if interest rates were higher. Access was limited by another change to houses with a cost of less than $ 1-million to mortgage insurance. The government launched a consultation on having creditors take on some of the risk and announced new reporting rules for the exemption. The federal government is responsible for 100 percent of an insured mortgage in the event of a default.
“Preliminary data obtained since the government implemented its latest alterations to mortgage rules in October, 2016, indicates that the rule changes are having their intended impact,” states Mr. Morneau’s letter to the fund.
“A decrease in the share of new guaranteed loans issued to highly-indebted borrowers suggests that the quality of credit is advancing in the high-ratio mortgage marketplace. This development helps to make sure that Canadians are taking on mortgages they can afford.”
Canadian existing-home earnings were down 2.1 percent in July, representing a fourth consecutive month of decline.
A report found a mortgage in Vancouver’s size was $517,415 in the year’s first quarter, a year 34, down from $ 553,719.
BMO senior economist Robert Kavcic said pruning steps taken over the last year from the B.C. and Ontario governments, in addition to local moves in Vancouver and Toronto, seem to have had more of an effect on cooling the marketplace than the national changes.
Mr. Kavcic said the government intervention at all levels was “absolutely necessary” given the unsustainable cost hikes that had taken place.
“It is tough in that we must endure a little bit of a [home market] correction today,” he said. “But I believe that the adjustment that we’re seeing now is a lot more favourable to what we’d have observed a few years later on if it had been allowed to operate.”
The finance committee’s April report said Ottawa should “examine greater support for first-time home buyers,” but it didn’t make a particular policy recommendation. The report highlighted testimony by the Canadian Mortgage Brokers Association that called to allow amortization periods to the maximum of 25 years, compared with mortgages.
Some mortgage amortizations were as large as 35 years by decreasing the maximum before Ottawa cracked down as recently as 2011. Ottawa acted again to limit them.
Mr. Morneau, Ontario Finance Minister Charles Sousa and Toronto Mayor John Tory had said in April that they wouldn’t be introducing any new measures that could boost demand for home.
Mr. Morneau enlarged that opinion in his letter to the committee.
“Additional government assistance for home ownership, particularly in the context of home markets undergoing rapid price growth and limited housing supply, will likely be counterproductive,” Mr. Morneau wrote. “Policies to additional boost home ownership by stimulating demand would apply more pressure on home prices, with minimum positive effect on home affordability”