The association that represents more than 11,000 Canadian mortgage professionals says that Ottawa’s policies have harmed the housing market.

In its annual State of the Mortgage Market report, Mortgage Professionals Canada says that the federal government’s efforts to cool rising home prices and demand has created cascading consequences and pressures.

“We are seeing downward trends and/or depressions in areas like the resale market, the outlook on employment in the housing construction sector, and a continued decline in rental vacancy rates,” said Paul Taylor, President and CEO of Mortgage Professionals Canada. “Federal policy changes are disqualifying potential first-time homebuyers and creating immense pressures on the rental market which is in turn driving rental prices higher. It is a spiralling problem.”

Taylor says that MPC continues to support the aim of ensuring that mortgage borrowers are able to make future payments but he says changes to the existing rules should be made.

“Our report illustrates that a more reasonable stress test level and lending restriction reforms are now needed to strike a better balance for borrowers and policymakers, improving housing affordability and Canada’s economy,” he said.

Improper levers
The report, available in full at mortgageproscan.ca, highlights that when improper levers are used, the housing market continues to be depressed, leading to wider impacts.

“While the government has been focused on borrowers and interest rates, the reduction of activity in the housing market and extremely low rental vacancy rates will impact not only costs to first-time homebuyers and all renters, but also impact employment and the overall economy,” explained Will Dunning, Chief Economist for Mortgage Professionals Canada and author of the report. “As a result of these policies, the economy will be weaker than it needs to be.”

Canada’s largest bank may have sparked a rate war by offering customers a “special offer” 5-year mortgage rate of 3.74%.

The reduction of 15 basis points is likely to be met with similar deals from other major lenders; many alternative lenders have already reduced rates but the Big 5 have been holding back.

“Banks could’ve cut fixed rates weeks ago. The reason they held out is because they can,” RateSpy.ca founder Rob McLister told CBC News.

With bond yields falling following the BoC’s dovish tone on interest rate rises, mortgage rates have been expected to fall and some lenders are already offering rates as low as 3.29% for a 5-year FRM.

The RBC cut is notable as it’s the bank’s first cut since 2017. It’s also notable for its minimal size, which will likely have a corresponding impact on the market – unless further cuts follow.

“RBC is the largest mortgage lender in Canada, so whenever they move their mortgage rates we can expect that the other four banks will follow suit,” James Laird, president of CanWise Financial told RateHub.ca. “We anticipate that the other big banks will soon have a publicly posted rate of 3.74% as well.”

RateHub.ca calculates that with a $400,000 mortgage a typical homeowner would save $32 a month on their $2,080 monthly payment.

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