Last year was the fourth time in just as many years that Finance Minister Jim Flaherty made mortgage rule changes; but it was undeniably that round that saw the most protests, especially by those in the industry. One of the arguments against the changes, made even before they officially went into effect, was that they would have a dire effect on employment, and cause it to sink to dangerous levels. Now, a chief economist at the Canadian Association of Accredited Mortgage Professionals (CAAMP) is saying those job losses may be even more than what we had first thought. But are his stats right?
Dunning recently went to Ottawa to present a report in which he bravely states that a whopping 190,000 jobs will be lost due to the shorter amortization periods placed on insured mortgages. For those that need reminding, those amortization periods have been brought down to 25 years from the previous 30 years people had to pay off their mortgages. But those limits are still on insured mortgages only.
Dunning says though, that the new build market will see 70,000 jobs lost, while the resale market will lose 120,000 jobs – all in just under three years. Considering that Canada creates about 20,000 jobs a month, these numbers would strip nearly 80 per cent of jobs for a full year.
But are these figures really correct? The Canadian Mortgage Trends blog, who obtained a copy of the report and reported on it, doesn’t give a whole lot of explanation except the numbers that are meant to scare us into hiding (or fighting Ottawa? We’re not sure.) Let’s remember that 15 years ago Canada had shorter amortization periods than we’ve had for the past three or four years. They were right around the 25-year mark that many are now, and the economy chugged along just fine.
CAAMP didn’t release its report just to scare us, though. They did have a suggestion to bring the housing market back into balance, and not cause such severe job loss. Unfortunately, it doesn’t make much sense.
CMT says, “To mitigate some of the economic impact, CAAMP has proposed allowing first-time buyers to extend their amortization to 30 years, as long as they are qualified by the lender at a 25-year payment. CAAMP notes that the government has already adopted a similar principle by allowing people to take riskier variable mortgages if they qualify at a higher 5-year posted rate.”
However, the tighter mortgage rules were only put into place to stop unqualified borrowers from buying homes that they couldn’t afford. Loosening rules further for qualified buyers won’t do any good, because these buyers will be qualified, and therefore can afford to purchase the homes under today’s restrictions.
What do you think about CAAMP’s predictions for employment, or rather the lack of it, within the next several years? Do they seem drastic to you, or do you think this is just more fallout from the mortgage rules put into place last year?
