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Mortgage stress test review called for as rising rates put more buyers on edge
Publication date:
August 4, 2022 • 16 hours ago • Read 2 minutes • 27 comments Toronto home prices fell a little more than six per cent in July from the previous month, reaching an average of 1.074 million of dollars, according to data from the Toronto Regional Real Estate Board. Photo by Tyler Anderson/National Post files
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Home prices and sales in Canada’s most populous city continued to slide as economic uncertainty and rising rates put more homebuyers on the sidelines.
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Home prices in Toronto fell a little more than six per cent in July from the previous month, reaching an average of $1.074 million, according to data from the Toronto Regional Real Estate Board. Despite the month-on-month drop, house prices in the city managed to rise by 1% from July 2021.
The number of homes changing hands fell 47% year-on-year in July and 24% compared to the previous month, with 4,912 units sold.
Despite the drop in sales, TRREB CEO John DiMichele said more households in the Greater Toronto Area are planning to buy a home in the future, but don’t know where the market is headed. The advice was aimed at the guidelines established by the Office of the Superintendent of Financial Institutions.
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“Policymakers could help alleviate some of this uncertainty,” DiMichele said in a statement accompanying the data. “As higher borrowing costs affect housing markets, TRREB maintains that OSFI’s mortgage stress test should be revised in the current environment. Consumers looking to renew their existing mortgages with a different lender should not be subject to an additional stress test burden beyond what they would face with their current lender.”
DiMichele further argued for a transparent process and stronger justification around the stress test rules.
TRREB chief market analyst Jason Mercer also warned that policymakers should take into account a growing population and push for more housing construction.
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“The Greater Toronto Area (GTA) population continues to grow and tough labor market conditions will drive that growth forward,” Mercer said. “Despite more balanced market conditions as a result of rapidly rising mortgage rates, policymakers must continue to take steps to increase housing supply to accommodate long-term population growth. .. With savings high and the unemployment rate still low, homebuyers will eventually incur higher borrowing costs. When they do, we want to have adequate supply or market conditions will tighten again.”
Toronto follows other markets such as Vancouver and Calgary in seeing declines in July as the market loses steam amid the Bank of Canada’s aggressive rate hike path, including a percentage point hike in July, and fears of a recession .
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Home sales fall in Vancouver, Calgary falls as rising rates and uncertainty take their toll
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David Larock, mortgage broker and president of Toronto-based Integrated Mortgage Planners Inc., said markets like Toronto tend to be harder hit than areas like Calgary, which saw sales fall 3 percent year over year in July, due to the speculative fever that attracts the market.
“…Toronto and Vancouver seem to be hit harder than places like Calgary, for example,” Larock said in an interview ahead of Toronto’s July data release Thursday to describe the overall slowdown in the market. “Certainly the more speculative markets have been more psychologically affected by the (Bank of Canada)’s one per cent increase and probably exactly as they intended.”
• Email: shughes@postmedia.com | Twitter: StephHughes95
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