On February 8, CREA appeared before a House of Commons Standing Committee on Finance tasked with studying the Canadian real estate market and home ownership. CREA reminded the federal government about the profession’s recommendations on the Home Buyers’ Plan and asked MPs to carefully consider the overall impact of past announcements on the housing market before introducing new initiatives.
Gary Simonsen, Chief Executive Officer, CREA, told the committee, “Most Canadians see their home as a source of pride, satisfaction and accomplishment, not to mention a safe environment in which to raise their family and create happy memories. This is why CREA has been advocating for the indexation and modernization of the Home Buyers’ Plan (HBP), a program that allows Canadians to use their RRSP savings to purchase their first home.”
The HBP was mentioned in multiple political party election platforms in 2015, however the federal government has not followed through to make changes to the program. CREA said they would continue to work with the government to ensure the HBP remains a valuable program for all Canadians.
CREA’s recommendations on the Home Buyers’ Plan
CREA is asking the federal government to:
- index the Home Buyers’ Plan to inflation to preserve its purchasing power and continue to help first-time home buyers attain home ownership; and
- allow Canadians to benefit from the Home Buyers’ Plan more than once to maintain home ownership if they face sudden life changes such as job relocation, the death of a spouse, a marital breakdown or the decision to accommodate an elderly family member.
Federal government announcements impacting the housing market
In the last eight years, the federal government implemented six rounds of changes to tighten the rules for new government-backed insured mortgages and contain risks in the housing market. Here is a summary from CREA:
1. Effective October 2008:
- Maximum amortization period of 35 years
- Minimum down payment of five per cent
- Consistent minimum credit score requirement
- New loan documentation standards
2. Effective April 2010:
- Debt servicing standards calculated based on the higher of the mortgage contract rate or Bank of Canada conventional five-year fixed posted mortgage rate, for mortgages with variable interest rates or fixed interest rates with terms less than five years
- Maximum refinancing limited to 90 per cent of the property value
- Minimum down payment of 20 per cent on non-owner-occupied investment properties
3. Effective March 2011:
- Maximum amortization period of 30 years
- Maximum refinancing limited to 85 per cent of the property value
- Withdrawal of government guarantees on low-loan-to-value non-amortizing secured lines of credit (effective April 2011)
4. Effective July 2012:
- Maximum amortization period of 25 years
- Maximum refinancing limited to 80 per cent of the property value
- Maximum gross debt service ratio at 39 per cent and the maximum total debt service ratio at 44 per cent
- Maximum purchase price of less than $1 million
5. Effective February 2016:
- Minimum down payment of 10 per cent for the portion of a house price above $500,000
6. Effective October 2016:
- Requiring all insured mortgages to qualify under maximum debt-servicing standards based on the higher of the mortgage contract rate or Bank of Canada conventional five-year fixed posted mortgage rate
- Standardizing eligibility criteria for high and low-ratio insured mortgages (effective November 2016)
7. Balancing risk (February 2017):
- A consultation process on lender risk sharing for government-backed insured mortgages
8. CMHC premium increases
- announced February 2014 – effective May 1, 2014
- announced April 2015 – effective June 1, 2015
- announced January 2017 – effective March 17, 2017
CREA argued, these measures were implemented over a short period of time and their full impacts have yet to be determined. CREA recommended the government take a pause to fully evaluate the cumulative impact of the recent changes before looking at implementing additional measures. As well, CREA offered their expertise to inform the government’s policy decisions.
Simonsen said, “We are prepared to share analysis of local housing market trends and apply our knowledge and data to help the government policy makers at all levels better understand how changes to housing market regulations may affect communities across Canada.”
To read CREA’s Opening Statement and Submission to the House of Commons Standing Committee on Finance, click here.
Join the REALTOR® Action Network!
When’s the last time you contacted your federal Member of Parliament (MP)? CREA makes it easy through their REALTOR® Action Network (RAN). RAN is our industry’s online advocacy platform built exclusively for CREA members. It connects you to your MP and provides you with news on issues at the federal level of government.
When issues arise that affect housing, property rights or the real estate sector, representatives from CREA meet with politicians and officials to discuss the issues. Prior to any federal budget, CREA also makes recommendations to the government on behalf of over 120,000 REALTORS® across Canada.
You can support CREA’s efforts through RAN. From time to time, CREA issues a “Call to Action” through the network to encourage members to support CREA’s efforts. For example, you may be asked to send a letter to your MP through RAN. Go to www.realtoractionnetwork.ca to join RAN today!
Note: You can also find contact information for your provincial MLA through RAN and participate in future Calls to Action facilitated by BCREA.