For the second year, Evan Siddall, President and CEO of the Canada Mortgage and Housing Corporation, attended the National Mortgage Conference in Toronto to defend and provide updates on the agency’s programs and policies.
He participated in a candid on-stage chat with Mortgage Professionals Canada CEO Paul Taylor, one that elicited some fresh information on the status of the First-Time Home Buyer Incentive (FTHBI).
FTHBI Uptake Running at 50%
Since the program launched in September, Siddall says CMHC has so far approved over 2,000 applications from first-time buyers for equity investments of nearly $40 million.
“We’re ramping up, and we’re seeing disproportionate take-up in Alberta and Quebec,” Siddall said, adding that a lender-specific promotion was likely behind the higher applications in Quebec. “Our bet, based on our current run rate, is that it will be about half taken up in the first six months.”
Siddall countered criticism over the lower-than-anticipated uptake by saying, “It may be that the reason we’re at half capacity is because there’s not as grand a problem that everybody says there is.”
He noted that first-time buyers are already well-served by existing mortgage policies, which currently allow them to purchase a house with as little as 5% down. When insurance premiums are factored in, that buyer’s equity can drop to as little as 1%, he noted.
“These are young people who (could) lose their jobs quickly…I’ve got a responsibility to worry about them. And I think you do too,” he said, referring to the broker industry as a whole. “The idea behind the shared equity plan is that we’d give people a chance to get into the market and that we wouldn’t do it by increasing their indebtedness, we’d actually lower it.”
Balancing First-Time Buyer Aid With Inflation Concerns
Taylor noted many people in the industry were disappointed that the FTHBI was the response the government brought forward to assist first-time homebuyers, which was met by a round of applause.
Siddall said the program was purposefully targeted and small in order to have a minimal inflationary impact on home prices.
If the program was fully taken up, the inflationary impact would add about $115 to the average value of a home in Canada, he said.
On the other hand, if they were to reduce the stress test by 100 bps and raise the maximum amortization to 30 years, and if it was used by all homebuyers, Siddall said the average home price would increase by $16,000 nationally, or by $40,000 in Toronto and $80,000 in Vancouver.
“That’s not helping first-time homebuyers…Even if those numbers are half, they’re significant,” he said.
Potential Increase to the $1M Cap for Insured Mortgages
Taylor asked Siddall whether there was any appetite to increase the $1-million cap on insured mortgages so more properties in Toronto and Vancouver could qualify.
Siddall confirmed it’s something he will be looking at when he sits down with newly re-appointed Finance Minister Bill Morneau.
Siddall noted he has had conversations with the association about the fact that when rates go up, “the stress test should maybe look a little different. And I’ve been receptive to that conversation. And the million-dollar cap, we haven’t moved it in a long time,” he acknowledged.
“On the one hand, if we make it easier to buy million-dollar homes I think I have a problem with that. On the other, if we’re providing insurance on that, we’re actually promoting financial stability. So, it’s a legitimate question.”
Not an Enemy of the Mortgage Industry
Siddall repeatedly tried to dispel any thoughts that he is hostile to the broker industry.
“People think I don’t like you. That’s not true,” he said. “In fact…the more complicated we make this stuff, the more people need you. So, you’re welcome.”
He added that his intentions are good, and that the policies in place are to ensure the health of the real estate markets and limit debt loads from rising further.
“If you want a crash in a real estate market, feeding debt is exactly the way to make it happen, I’m telling you. I’m trying to preserve healthy markets, which you should want.”
He added: “I don’t want you to think we’re opposed to homeownership. That’s just not the case. It’s like blood pressure, you can have too much of a good thing, we’re just trying to get that balance right.”