On one hand, there was a slew of new regulatory measures that put tight restrictions on lending practices and raised borrowing costs for many consumers. On the other hand, low interest rates helped to keep the housing market going and buoyed consumer confidence in purchasing or refinancing homes. This article takes a closer look at some of the major developments in the Canadian mortgage market during 2016 and their impact.
One of the most notable changes in the Canadian mortgage market in 2016 was the implementation of new regulatory measures from the federal government. The Department of Finance amended the existing Mortgage Insurance Underwriting Standards (MUIS) in an effort to tighten up lending criteria and make sure lenders were not taking excessive risks when providing financing. This included setting minimum down payment requirements, limits on total debt service ratios, and tough new stress tests on borrowers’ ability to make their payments.
The aim of these measures was to reduce the number of defaulted mortgages and limit the risk posed by the housing market. It was also intended to help slow the growth of house prices in order to avoid a bubble forming in certain cities, such as Vancouver and Toronto.
Unfortunately, these tighter rules had a downside – they made it more difficult for many would-be homebuyers to qualify for a mortgage. This, in turn, led to a slowdown in the housing market, as fewer people were able to enter the market. To make matters worse, the higher borrowing costs resulting from these tighter regulations further reduced consumer demand.
Another major development in the Canadian mortgage market in 2016 was the continued low interest rate environment. While rates did rise slightly over the course of the year, they remained relatively low by historical standards. This helped to keep borrowing costs low and gave homeowners and buyers more flexibility in their mortgage decisions.
At the same time, however, this low interest rate environment posed challenges for lenders. With rates so low, lenders had to find ways to compete with each other and make their products attractive to borrowers. This typically involved offering lower interest rates or special promotions or incentives to draw in customers.
Finally, 2016 saw the emergence of alternative lenders in the Canadian mortgage market. These lenders are typically non-bank entities that offer new services or products that are not typically available from traditional lenders. Examples of these include online lenders that offer short-term, high-interest loans or those that provide non-conventional financing, such as hard money loans.
Overall, 2016 was a year of significant upheaval in the Canadian mortgage market. New regulations introduced by the Department of Finance had a significant impact on the availability of mortgages and the cost of borrowing. At the same time, the low interest rate environment kept borrowing costs low, enabling many consumers to take advantage of attractive financing options. Finally, alternative lenders emerged, providing new options for consumers who are unable or unwilling to access a traditional mortgage. In conclusion, 2016 was a challenging but ultimately successful year for the Canadian mortgage industry.
This article was contributed on Jul 25, 2023