Mortgage stress tests set to tighten amid Bank of Canada warnings – fr

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Mortgage stress tests set to tighten amid Bank of Canada warnings – fr


OTTAWA – Canadians looking to buy a home will face more rigorous mortgage testing in days, as the federal government and a national regulator tighten the rules following new warnings from the central bank that houseworkare crowded too much this.

In its latest review of the financial system, the Bank of Canada said that many houseworks have taken on large mortgages relative to their income, which limits their flexibility to deal with an unforeseen financial shock such as the loss of a job.

The total housework this has increased 4% since the start of the pandemic, increasing sharply since the middle of last year as the housing market began to warm up. The percentage of expensive loans, defined by the bank as more than 4.5 times houseworkThe company’s revenues have also surpassed highs recorded five years ago when policymakers tightened mortgage rules.

The bank’s report says housing market activity and troubling mortgage numbers are reminiscent of 2016 just before stress tests were introduced on mortgage applications to ensure that buyers could handle the downturns. payments if interest rates rise.

The Office of the Superintendent of Financial Institutions said on Thursday that effective June 1, the eligibility rate for uninsured mortgages will be set two percentage points above the contract rate, or 5.25%, whichever is greater.

Hours later, the federal government, which had been pressed to do the same, announced it would set the same standard for same-day insured mortgages, effectively trying to prepare buyers for a hike in interest rates. from their current lows.

“The recent and rapid rise in house prices is pressing middle-class Canadians across the country and raising concerns about the stability of the market as a whole,” Finance Minister Chrystia Freeland said in a statement accompanying the ad.

“Maintaining a healthy and stable Canadian housing market is essential to protect middle-class families and to Canada’s broader economic recovery.

In its report, the Bank of Canada said the current housing boom could help the economy rebound in the short term, but could lead to a future collapse if houseworks have to cut spending because of another downturn.

And by biting more than they can chew with a new mortgage, Gov. Tiff Macklem warned it could houseworks more vulnerable to rising interest rates when renewing their loans, adding that it was up to Canadians and lenders to be careful.

“The current rapid increases that we’ve seen in prices – don’t expect these to continue indefinitely,” Macklem said at a press conference.

“Don’t expect you to be able to pull out equity and refinance your mortgage in the future on the basis that prices will continue to rise as we have seen.”

House prices were up 23% nationwide from a year earlier, the bank said in its report. The Canadian Real Estate Association said this week that the average price of a home sold in Canada in April was just under $ 696,000.

The bank said the price spike was more prevalent in cities than it was five years ago, when things were largely concentrated in and around Toronto and Vancouver. In the bank’s opinion, the Greater Toronto Area, Hamilton and Montreal are overheating and Ottawa is on the verge of joining them.

With house prices rising and the supply of available housing lagging behind demand, some homeowners may be tempted to buy now for fear of not being able to afford anything in the future.

The hands of the Bank of Canada appear to be tied to its ability to raise its key rate, which could give cold water to anyone looking to buy now. Macklem said parts of the economy still need central bank support and the labor market needs to create some 700,000 jobs for the employment rate to reach what it needs to be before rates can. increase.

The review of the risks to the financial system also highlighted concerns about a too early withdrawal of state aid to businesses. Businesses worry about their future viability when government support ends, as many remain uncertain about what post-pandemic life and economic activity will look like, the central bank said.

For banks and insurance companies, the Bank of Canada said cybersecurity remains one of their top concerns.

This report by The Canadian Press was first published on May 20, 2021.

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