Mortgage Rule Changes Are Cooling Housing Market: Morneau

Globe and Mail ~ August 22nd

Finance Minister Bill Morneau says last October's sweeping mortgage rule changes aimed at cooling Canada's housing market have successfully dampened high-risk borrowing.

But despite a report urging Ottawa to look at ways of boosting support for Canadians entering the housing market, the Minister ruled out any new measures along those lines, expressing concern that such an approach would encourage higher house prices.

The comments are part of a recent letter from Mr. Morneau to the House of Commons finance committee, which had released a wide-ranging report on housing in April.

The federal government announced four policy changes last October in response to concern over rapidly rising home prices, particularly in Vancouver and Toronto.

The changes included a new stress test for all new insured mortgages to ensure that home buyers would still qualify for a loan even if interest rates were slightly higher. Another change restricted access to mortgage insurance to homes with a purchase price of less than $1-million. The government announced new reporting rules for the primary-residence capital-gains exemption and also launched a consultation on having private lenders take on some of the risk associated with insured mortgages. Currently, the federal government is responsible for 100 per cent of an insured mortgage in the event of a default.

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