Reactions to Canada’s Latest Round of Tougher Mortgage Rulesby and
Canada is taking another crack at curbing risks from a housing boom, enacting measures that will ripple from young families struggling to buy their first home in Vancouver to executives at the nation’s largest banks, which may have to start bearing more risk of losses on loans.
Finance Minister Bill Morneau also plans to remove a tax break that foreign homebuyers claimed when they later sold the property, and to increase mortgage insurance eligibility requirements even for borrowers with large down payments.
Here are reactions to the plans Morneau laid out Monday in Toronto:
* “As regulation accelerates, concerns will probably rise, justified or not, that the so-called bubbles in Vancouver and, to a lesser extent, Toronto will burst as opposed to slowly deflate,” said Frances Donald, senior economist at Manulife Asset Management in Toronto.
“We can probably expect an initial knee-jerk reaction in the housing market data, as potential buyers question whether there’s more to come.” The moves also give the Bank of Canada more room to cut its 0.5 percent policy interest rate again if the economy weakens, she said.
* The effect of ending the foreign buyer tax break “will be modest at best,” said Brad J. Henderson, president and chief executive officer of Sotheby’s International Realty Canada. “Non-Canadian residents’ ownership of residential real estate in Canada is a factor in the demand for real estate, but it’s not the only nor the most significant factor. By far, the lion’s share of demand is from domestic-resident buyers.”
* “The measures announced today should help to reduce the risk of a housing-market correction in Vancouver and Toronto, and a broader retrenchment in Canadian household spending arising from elevated debts,” Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, wrote in a research note.