A report by Toronto-Dominion Bank says demand for housing could be cut anywhere from 5% to 10% because of tougher qualification rules being considered by Ottawa.
The report takes aim at a proposal from the Office of the Superintendent of Financial Institutions.
The federal banking regulator is looking to crack down on non-insured mortgages – impacting people with at least 20% down – by making those consumers qualify based on a rate 200 basis points above what is on their contract.
Those consumers, who often have as little as 5% down, must qualify based on the posted five-year rate of the Bank of Canada, which is currently 4.84%
The economists suggest changes to tighten the rules on non-insured mortgages will lead buyers to -- quote -- "come up with a bigger down payment, opt for a lower priced home and scale back other debt," and may even delay purchases all together.
Other key changes implemented by Ottawa included increasing the minimum down payment on homes worth more than $500,000 and reducing portfolio insurance, a program that allowed financial institutions to securitize loans they deemed risky, but not legally required to be insured.
