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Mortgage Rule Impact

Canadian-HousingPeople are itching to know what short-term damage the new mortgage rules will inflict on real estate prices.

So far, in the first full month of tighter insured lending, home sales are down almost 6%.

Additionally, we hear (anecdotally) that insured mortgage application volumes are noticeably lower, even after accounting for seasonal adjustments.

CREA economist Gregory Klump says, “The broadly based decline in August sales activity suggests that some buyers may no longer qualify for a mortgage now that amortization periods for high ratio mortgages have been shortened.”

“As the lynchpin of the housing market, lower first-time buying activity will have downstream effects over the rest of the market.”

Klump adds that it could take “a few more months of data” before we can “gauge the broader impact of recent regulatory changes on Canada’s housing market.”

With fall being the second busiest mortgage season, we should get a good read on things by early December. By then we’ll also get commentary and data from banks reporting their August through October earnings results. The fourth quarter will be their first full fiscal quarter under the new mortgage regime.

In the meantime, we in the business all sense what shorter amortizations, tougher refinance rules and tighter debt ratio limits will do. And it’s not bullish for home values in the near-term…which is exactly what policy-makers want.


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Related stories: New mortgage rules…, OSFI mortgage guidelines

Rob McLister, CMT