By Dave Flaherty/The Oshawa Express
Ontario’s real estate agents want federal political parties to make homeownership more affordable.
The Ontario Real Estate Association (OREA) is calling on parties to reverse what it calls “detrimental policy changes” which make it more difficult for families to buy a home.
“With just under 100 days until the federal election in October, all four parties are missing a clear opportunity to offer a comprehensive plan to turn the declining homeownership trend around, keeping the dream alive for tens of thousands of young families,” said OREA CEO Tim Hudak in a released statement. “It’s an urgent issue that needs to be addressed – and whichever party does so, stands a good chance of winning, especially in the vote-rich GTA and lower mainland of B.C.”
Realtors are asking federal parties to restore the option of a 30-year amortization period for homeowners with insured mortgages.
In a letter written to Canada’s Standing Committee on Finance, Hudak said 30-year mortgages are common for homeowners with uninsured mortgages.
According to Hudak, the majority of those with insured mortgages are younger families and first-time buyers.
“It is entirely reasonable for some of them to consider a longer amortization period in order to become homeowners earlier,” Hudak said.
To him, there is no reason uninsured borrowers have this option, but insured borrowers don’t.
The largest amortization period for insured mortgages in Canada was 35 years until 2012, when it was reduced to 25 years.
OREA is also pressing for changes to Canada’s mortgage “stress test,” first introduced on Jan. 1, 2018.
This test requires Canadians applying for, renewing or refinancing a mortgage to prove they are financially-stable. This includes meeting hypothetical interest rate increases of two per cent.
Hudak said the “stress test” has a negative impact. He points out housing resales in Canada dropped 11 per cent from 2017 to 2018.
He wants testing to be more “flexible” by lowering the hypothetical two per cent interest rate increase within it.
It should recognize different types of mortgages come with unique levels of risk, he adds.
“A five-year fixed-rate mortgage should not be subject to the same risk assessment and stress test criteria as a short-term, variable rate mortgage,” Hudak wrote in the letter. “Indeed, the main reason to choose the fixed-rate mortgage is to manage risk.”
Hudak says the stress test has caused fewer families to upgrade their housing. This leaves fewer “starter homes” available on the market.
“This compounds the shortage caused by insufficient new housing starts,” he said.
The association wants the test eliminated for those renewing their mortgage with a different lender.
While the test may prevent families from defaulting or taking on mortgages they cannot afford, Hudak said it creates the opposite effect for those seeking a renewal.
“The purchase is already made, and the owner is already in the home. When a family renews a mortgage, they’re shopping for the best rate and terms for an existing obligation,” Hudak said. “If that family fails to clear the regulator’s arbitrary stress test – a test invented long after the family likely bought the home – the effect is merely to prevent competition by locking the family into renewing with the current lender, at whatever rate that lender offers.”
Despite these concerns, it appears the housing market in Durham Region is on the upswing.
The Durham Region Association of Realtors reported 1,093 sales in June, a 19 per cent increase from May.
The average selling price was $620,506, up two per cent from the previous year, but up from $580,743 in February.