Real Estate

Stress Test Being Rolled Back?

  • Last Updated:
  • May 20th, 2019 2:18 pm
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Deal Fanatic
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Sep 8, 2007
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Way Out of GTA
Bears don't know what to do. Because on one hand if they wanted to get a place, they could get a mortgage easier but on the other hand it's likely to allow prices to keep creeping higher (hence not allowing them to buy 50% lower during a crash from here).

Conundrum!
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Jul 25, 2008
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ottawa
This is about as smart as Trump's fiscal explosion.
Banned
Jun 1, 2017
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Stupid OSFI did something to show their existence. Before stress test, who knew what OSFI was?
Member
Aug 16, 2011
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OTTAWA
Until he's elected as the PM and actually puts a bill on the floor... these are all words for his election platform
Deal Addict
Dec 27, 2006
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https://www.bnnbloomberg.ca/i-would-fro ... gage-rules

'I would frown upon it': Poloz on calls to loosen mortgage rules
The governor of the Bank of Canada is rejecting calls to unwind some of the strict new mortgage policies that have contributed to a cooldown in the country’s previously red-hot housing markets.

"I would frown upon it," Stephen Poloz told BNN Bloomberg when asked about pressure on policymakers to loosen certain rules.

Real estate boards in the country's two largest housing markets have been speaking up in recent months about fallout from the B-20 mortgage guideline that was implemented by the Office of the Superintendent of Financial Institutions at the start of 2018. The rule imposed new stress tests for uninsured mortgages, where the borrower makes a down payment of at least 20 per cent on the purchase of a home.

But Poloz isn't buying into the outcry, noting that jawboning alone wasn't enough to change homebuyers’ behaviour.

"I think for a couple of years we were advocating that individuals do their own self-stress tests – which just makes common sense, you know, not to assume that rates would be that low forever," he said in an interview taped Thursday in Ottawa after the central bank published its Financial System Review.

"There wasn't much reaction to that kind of advertising, if you want to call it that. So, in the end, I think these rules are having an important effect and one that people are adapting to."

READ MORE ON CANADIAN HOUSING

Toronto and Montreal boost Canadian home sales in April
Poloz underestimates Canada's housing slump: Capital Economics
B-20 mortgage stress test needs to be revisited: CIBC’s Tal
And while the B-20 guideline has been cited as a factor in recent data showing sharp year-over-year declines in home sales across Metro Vancouver, Poloz said the impact has been less profound outside of that city and Toronto, where prices ran up most sharply before policymakers intervened.

"If you look at markets that didn't have any froth, people are adapting quite normally," he said. "Any place from Winnipeg to Ottawa, Montreal, Halifax, Moncton are all behaving exactly according to our models. So we think it's doing its job."

While the central bank's Financial System Review acknowledged progress on vulnerabilities surrounding consumer debt and housing market imbalances, it also put the spotlight on at-risk Canadians. Indeed, the Bank of Canada noted a significant proportion (42 per cent) of households would struggle to refinance their mortgage if home prices fall 20 per cent.

While not common, Poloz said that type of market correction is "conceivable," particularly given the run-up in prices in recent years. But he’s confident Canadians understand the risk.

"I think that most people are mentally prepared," he told BNN Bloomberg. "And, in Canada, historically when these things have happened, people understand they've gone maybe underwater, but you know that within a few years they're no longer underwater and life goes on. People pay their mortgage and we're okay."

HAVE YOUR SAY

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Do you think the B-20 mortgage stress test rules need to be softened?
Member
Jul 25, 2008
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ottawa
neilsmith43 wrote: Stupid OSFI did something to show their existence. Before stress test, who knew what OSFI was?
hopefully anyone who invests in bank stocks.

ideally also anyone who takes debt from OSFI-regulated institutions, but admittedly our education system isn't the best.
[OP]
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Feb 22, 2011
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Toronto
Jeremyl007 wrote: Until he's elected as the PM and actually puts a bill on the floor... these are all words for his election platform
If Ford has taught us one thing it's that PC deliver on promises in rapid fashion. Especially when it comes to cuts or rollbacks on policy. I also think it's inevitable he wins, LPC has been trending down for 4 years and this admin is at all time lows with all the pollsters and still going down.
Banned
Jun 1, 2017
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Jeremyl007 wrote: Until he's elected as the PM and actually puts a bill on the floor... these are all words for his election platform
Anyway we don't want left-wing party to have communism. We don't want to be Greece or Venezuela.
Deal Addict
Dec 23, 2010
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Moon
Scheer has just won the vote of every home owner. People should be absolutely free to choose how much they want to spend on the house. It should be between me and the banks to decide what I can afford. The government should have NOTHING to do with it.
Banned
Jun 1, 2017
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Applesmack wrote: Scheer has just won the vote of every home owner. People should be absolutely free to choose how much they want to spend on the house. It should be between me and the banks to decide what I can afford. The government should have NOTHING to do with it.
Yes. Government should not but idiot Wynne did. OSFI did.
Member
Feb 7, 2018
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Applesmack wrote: Scheer has just won the vote of every home owner. People should be absolutely free to choose how much they want to spend on the house. It should be between me and the banks to decide what I can afford. The government should have NOTHING to do with it.
Agree with you on purchases with >= 20% down as they aren’t CMHC (taxpayer) backed, Govt should not penalize savers and put them in the same bucket as people who roll the dice with a small DP and hope prices rise. I’m all in favour of stress testing < 20% down, as the banks will just offload all risk onto taxpayers like they did in the states.

The LPC really needs to fix itself - this whole NDP lite look is starting to alienate traditional Liberal voters (fiscally conscious, socially liberal). This whole OSFI business is a total scam, we all see right through it, and many homeowners and potential homeowners will vote the other way because of it.
Deal Guru
Feb 29, 2008
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wiab89 wrote: Agree with you on purchases with >= 20% down as they aren’t CMHC (taxpayer) backed, Govt should not penalize savers and put them in the same bucket as people who roll the dice with a small DP and hope prices rise. I’m all in favour of stress testing < 20% down, as the banks will just offload all risk onto taxpayers like they did in the states.

The LPC really needs to fix itself - this whole NDP lite look is starting to alienate traditional Liberal voters (fiscally conscious, socially liberal). This whole OSFI business is a total scam, we all see right through it, and many homeowners and potential homeowners will vote the other way because of it.
Yup. I was Lib up until the last couple years. Completely done. How on earth am I getting stress tested when I have 35% down? It’s just dumb. Stress test those who don’t have enough of a down payment.
Newbie
May 6, 2019
28 posts
9 upvotes
Rolled back? Will they really do that? Politics :/

In agreement that savers should not be penalized.

Makes zero sense why someone who has a large down payment, stable job, can qualify but is turned away because we all gotta pretend interest rates are 2% higher.
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Sep 18, 2012
388 posts
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BRAMPTON
Applesmack wrote: Scheer has just won the vote of every home owner. People should be absolutely free to choose how much they want to spend on the house. It should be between me and the banks to decide what I can afford. The government should have NOTHING to do with it.
This is not really how our economic system works. The Bank of Canada sets the overnight lending rate which largely determines what rate banks will lend money at which in turn determines how much debt consumers are willing to take on. The Bank of Canada is the fiscal agent for the government and it generally reacts to the state of the economy/inflation which the government itself has a major hand in manipulating. Consumers and banks never work in isolation....anybody who thinks that doesnt know what they are talking about.

Inflationary fiscal policy like prolonged low interest rates should countered by strategies like the stress test to keep things in balance. This is only logical. The people arguing otherwise are a bit hypocritical....they are all for government manipulation that inflates prices but they are adamantly against any government manipulation that helps stabilize prices/bring them back down to earth. This makes no sense outside of people being self serving.

Full disclosure - I own my own home and am not a priced out renter.
Sr. Member
Nov 7, 2017
565 posts
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JayLove06 wrote: Yup. I was Lib up until the last couple years. Completely done. How on earth am I getting stress tested when I have 35% down? It’s just dumb. Stress test those who don’t have enough of a down payment.
It is not completely dumb. A lot of people I know personally or friends of my friends working as contractors, running small businesses, etc. They take cash and report almost zero income to the CRA. It's not only Asians who laundry the money here. I would say 70% of contractors I know would take cash without paying taxes. After that they bring 50% down to bank and buying the houses in GTA for over 1-2 million. Of course they wouln't like to have a stress test in place while having all relatives on welfare and wanting to buy property for them as well. Of course they are not able to show stable income because they hiding it and not paying taxes. Definitely they would be mad on liberals.
Jr. Member
Aug 27, 2018
172 posts
163 upvotes
parmalat wrote: This is not really how our economic system works. The Bank of Canada sets the overnight lending rate which largely determines what rate banks will lend money at which in turn determines how much debt consumers are willing to take on. The Bank of Canada is the fiscal agent for the government and it generally reacts to the state of the economy/inflation which the government itself has a major hand in manipulating. Consumers and banks never work in isolation....anybody who thinks that doesnt know what they are talking about.

Inflationary fiscal policy like prolonged low interest rates should countered by strategies like the stress test to keep things in balance. This is only logical. The people arguing otherwise are a bit hypocritical....they are all for government manipulation that inflates prices but they are adamantly against any government manipulation that helps stabilize prices/bring them back down to earth. This makes no sense outside of people being self serving.

Full disclosure - I own my own home and am not a priced out renter.
In addition when it all blows up the bankers will want bailing out. As a precondition of this the state has every right to limit their stupid, selfish behaviour.

People who think banks are independent of the state fall into two categories:

1. ill informed people who are too lazy or not smart enough to read up
2. disingenuous people

Which is Scheer? I won't vote for him, either way.
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Jan 7, 2019
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I personally don't believe the stress test will be removed but would love to see it happen.

I'm itching to refinance my two properties, get the money out and buy another two investment condos.
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Deal Guru
Feb 29, 2008
13904 posts
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bobitto wrote: It is not completely dumb. A lot of people I know personally or friends of my friends working as contractors, running small businesses, etc. They take cash and report almost zero income to the CRA. It's not only Asians who laundry the money here. I would say 70% of contractors I know would take cash without paying taxes. After that they bring 50% down to bank and buying the houses in GTA for over 1-2 million. Of course they wouln't like to have a stress test in place while having all relatives on welfare and wanting to buy property for them as well. Of course they are not able to show stable income because they hiding it and not paying taxes. Definitely they would be mad on liberals.
I don't care for anecdotes.

I'm speaking in terms of actual logic. A stress test is to determine whether you can handle payments if interest rates go up, correct? Now, if you have a 10 year fixed rate mortgage. Your payments are the same for 10 years at the same rate. After putting 20% down and paying the mortgage down for 10 years you're telling me this indivual is hyper sensitive to rising rates? 10 years of paying down a mortgage and odds are income has increased. Why on earth are we testing this individual on a 2% higher rate from day and completely disregard paying down the mortgage for TEN YEARS?

So yes, in its current form, it is DUMB. Stress test should be for riskier individuals, not some stupid catch all. As for your friends who live on welfare and getting mortgages, I mean, that is not the norm. Why should I be penalized for that?

You're hurting everyone because of some loopholes used by a small minority? Sounds like typical liberal idiocy. How about you know, actually tweaking it to the individual? Just picking some arbitrary number is stupid...

I don't know anyone who's on welfare living in million dollar houses. Can't relate to your story. I do know plenty earning good money and unable to buy because of the stress test. So what does that do? It loads up on condos. Condos are soaring in value which is hurting people getting into the market.

Libs failed here just like they failed in Ontario with the rent controls.

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