Last year was an interesting one for the Canadian new and resale housing markets. The introduction of the mandated mortgage stress test set out by theOffice of the Superintendent of Financial Institutions (OSFI) had a significant effect, in that both new and resale home sales were down. First-time buyers were especially affected, as most either avoided entering the market or rescinded their offers because they could not pass the test. The stress test requires all people (new and renewal) borrowing from federally regulated lenders such as banks to prove that they can afford future mortgage payments even if interest rates rise substantially. This applies even for mortgages requiring more than a 20 per cent down payment.
I understand the reasoning behind this idea, but I question the logic of applying such a stringent test to first-time new-construction condominium buyers. These residences will take anywhere up to five years before occupancy is available. First-time purchasers are typically at the beginning of their careers, and euring those years, buyers will earn equity, advance their careers and make more money. It is unfair to test them now for financial situations that are years away. In addition, we want first-time buyers to be able to take advantage of our incredibly low mortgage rates.
