Mortgage growth hits low as banks ask for stress-test relief

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Read analysis from North East Mortgages president Terry Kilakos on mortgage rule changes that went into effect in October 2018 ( OSFI dropped the hammer on the mortgage market ), as well as commentary from December 2018 ( Treat Canadians like the responsible homeowners they are ).

Residential mortgage growth has dipped to a 17-year low the Bank of Canada says, according to a Bloomberg report .

Growth in residential mortgages dipped to 3.1% last December when compared to the same month the previous year. It’s the lowest level of growth since May 2001, Bloomberg reported.

At the same time, Canada’s big banks are asking for relief from mortgage stress-test rules. The rules require prospective homebuyers to be able to handle borrowing rates 200 basis points higher than their contracted rate.

Banks have been lobbying the Office of the Superintendent of Financial Institutions (OSFI) to add some flexibility to the rules for when rates change. CIBC deputy chief economist Benjamin Tal told Reuters that the rules don’t account for a change in market conditions.

“It’s not something that has to be set in stone. It should be more dynamic, ”he told Reuters. “You have to assess the damage to the housing market, whether that damage is too severe, and what other forces in the market are leading to slower growth.”

The stress test rules were put in place last January by OSFI, in an attempt by the government to cool down the Canadian housing market, particularly in Vancouver and Toronto.

Those two cities posted their slowest years of sales in at least 10 years, Bloomberg reported, with average prices in the BC city falling 9.1% last year.

A CIBC analyst told the news wire the cooling off has been “engineered” with the co-operation of banks. “It makes for a healthier lending environment and a healthier housing environment for the longer term,” Robert Sedran said to Bloomberg.

Despite the declines in Canada’s hottest markets, in Montreal, housing prices were still on the rise. Prices rose 5.% in the city, according to a report in The Globe and Mail .

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