Canada’s mortgage professionals are going to bat for first-time home buyers, meeting with key policy makers in Ottawa this week. Their push is for the federal government to implement the housing commitments promised at election time, as well as to propose new policy changes that would ease entry into the market.
Senior members of Mortgage Professionals Canada, the national industry group that represents over 12,000 brokers, lenders, and insurers, will implore MPs, ministers, and senators to consider new methods to improve affordability, and reassess existing programs that aren’t quite hitting the mark.
“On behalf of our almost 15,000 members and their tens of thousands of clients, we are pleased to be here to continue our advocacy,” said Joe Pinheiro, MPC Chair. “It’s quite clear to policymakers and the Canadian public that urgent action is needed to allow certain first-time homebuyers access to homeownership, which will help the government meet its stated priority of growing the middle class. The implementation of MPC’s recommendations can help achieve this.”
Mortgage Insurance Requirements Need a Rethink
Of particular note is a focus on re-evaluating the the mortgage stress test, and making changes to current mortgage qualification criteria, which has been criticized by the industry as being too restrictive.
“We have a couple of primary asks,” Paul Taylor, MPC president and CEO, told STOREYS. “The first one is really just to have the government implement one of its election promises, which is to increase the purchase price for mortgage insurance eligibility; right now, anything over a million dollars, you need a 20% down payment for. In Toronto or Vancouver, you can’t get more than a one-bedroom condo if you don’t have a million bucks. So, for a growing family to actually have $200,000-plus in cash is next to impossible to achieve.”
“We’ve also seen a 20% price appreciation in real estate, all across the country in the last 12 months; the increase in itself has almost just been inflationary adjustment, it’s not much higher than that. The longer they wait to implement it, the less it’s going to mean, so we wanted to push that through.”
A More Elegant Solution
He adds that it’s time for policy makers to try a fresh approach; this federal government, like the ones before it, has heavily focused on cooling the demand side of the market in attempts to improve balance, rather than adding supply.
“Over time, that’s had a really detrimental effect in that it’s exacerbated the wealth gap and the only people who can afford property now it seems, are the people who already afford property. So it’s created a bit of a feedback loop,” Taylor says.
Other initiatives designed to improve first-time buyer affordability have also missed the mark, he says, such as the First-Time Home Buyer Incentive. Introduced in September 2019, this shared equity program essentially adds a second mortgage -- payable to the federal government, who also has a share in the home’s growing equity -- in exchange for a 5 - 10% down payment boost. Uptake has been woefully modest; designed to support 100,000 qualifying buyers, there were just 9,520 applicants in the program’s first year.
READ: Canada’s First-Time Home Buyer Incentive is Hardly Helping Anyone In Big Cities
Taylor says that in addition to people generally not seeming enthused to co-own a home with the government, an overlooked factor are the associated pricey legal fees, which just compound costs for buyers. Instead, he says, MPC is recommending a 30-year insurable amortization, despite anticipating government pushback.
“It's really just a more elegant means to achieve the same thing. But there’s been some reticence at the government level to permit that, I think they see the extension of an amortization as an inflationary type of a measure, but it’s really achieving exactly the same thing as the program that they’ve implemented, just in a much simpler way,” he says.
Discussions will continue through the remainder of this week; while it remains to be seen what measures will eventually come down the pipe, the timing of any changes will likely be in the upcoming spring budget, the date of which is to be determined.
“We’ve got several meetings with policy groups, and we’ll get a sense of what the reception will be towards the end of the week,” Taylor says. “By all accounts, most of the MPs -- the elected officials anyway -- are generally very receptive to what we’re suggesting. It’s hard to say whether we’ll actually move the needle at the policy level, but we’ll certainly keep trying.”
