The fury was so palpable, and so widespread, that Carolyn Rogers had to do something. So in 2019 she schlepped to Bay Street to address the unrelenting criticism of Canada’s new mortgage rules.
Ms. Rogers, who left OSFI later that year and is now senior deputy governor at the Bank of Canada, wasn’t having it. “This is simply prudent,” she told an audience at the Economic Club of Canada in Toronto. “The stress test is, quite simply, a safety buffer that ensures a borrower doesn’t stretch their borrowing capacity to its maximum, leaving no room to absorb unforeseen events.”In finance, such anomalies are referred to as black swans.
Because Canada has conservative mortgage rules, coupled with other safeguards introduced after the financial crisis, such as bigger capital buffers at each of the Big Six banks, the country’s financial sector can withstand a financial calamity .and found they were in good enough shape to withstand a severe economic downturn where the unemployment rate jumps to 13.5 per cent – almost triple the current level – and house prices fall 29 per cent from their peak.
Did Canada’s mortgage rules contribute to cooling the housing market? Absolutely. But, if they were as pernicious as the haters believed, the rally that transpired during the pandemic never would have materialized. Instead, ultralow rates took precedence, and their impact was so powerful that hardly anyone noticed whenUntil then, borrowers taking on new, uninsured mortgages had to prove they could
What an absurd article. Had the government not made such profoundly bad policy decisions leading to an uncontrolled rise in prices and economic dependence on RE - which will ruin many Canadians, regardless - the stress test wouldn’t have been needed at all.
So why have 1 and 4 Canadians said they may lose their homes if interest rates rise. The stress test does not look at a losses job, high gas and grocery prices.