Tighter mortgage rules would have far reaching consequences for economy: CREA

The Canadian Real Estate Association(CREA) issued a “call to action” this week to more than 100,000 members urging them to write their Member of Parliament (MP) to “explain the negative impact additional mortgage financing rule changes would have on home buyers, home owners and the economy.”

In the included form letterthat CREA is asking members to sign and send to their MP, the mortgage rule changes that took effect earlier this year were characterized as “measured and balanced.” The author argues that those changes have had the desired effect and warns that a further tightening of the rules could destabilize Canadian housing markets and the economy.

From CREA's letter.

"Additional changes to mortgage financing rules would raise the barrier to homeownership excessively and destabilize housing markets and the economy. In particular, we are concerned about the negative impact modifications to the allowable amortization period or minimum down payment requirements would have. These changes would create affordability problems, especially for first-time buyers. First-time buyers are the first link in a chain reaction of real estate activity. They allow existing home owners to change properties or rent. Creating burdensome barriers for first-time buyers will seriously impact the rest of the market, including retirees looking to downsize.

Further tightening of mortgage rules would have other far reaching consequences for the economy. It risks causing a home price correction, a drop in the net worth of Canadian households, lowered economic growth and reduced tax revenues. Consumer confidence would be damaged, labour mobility would be impeded, and unemployment would stay elevated."

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