By Justin Goulet (@JustinGoulet21)

New report shows mortgage stress test causing headaches for would-be homebuyers in Lethbridge

Mar 6, 2019 | 11:34 AM

LETHBRIDGE, AB – The federal mortgage stress test is causing issues for would-be first-time homeowners in the Lethbridge area.

A new report by the Building Industry & Land Development Association Lethbridge Region (BILD) and the Lethbridge and District Association of Realtors (LDAR) looks at the impact the Canada-wide mortgage stress test has had on the local housing market.

The stress test is also known as B20 and requires borrowers to show they can handle interest rates two percentage points above the current rate.

Some of the key findings of the BILD and LDAR report include:

-New home sales were the lowest they’ve been since 2001 in 2018

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-Residential resale dropped 3.6 per cent in 2018 from 2017

-Following the stress test, home buyers in Lethbridge saw their purchasing power decrease by 17.3 per cent and an additional 5.5 per cent due to rising interest rates

-Almost 14 per cent of the population in Lethbridge has been priced out of buying an average-priced home in the resale market

-The hardest hit by the impacts of the stress test are lower income households. 65 per cent of households cannot afford an average single-family home

“The program was implemented to cool some of the high-risk markets like Toronto and Vancouver. What it has done, though, is cool markets that didn’t need to be cooled such as Lethbridge,” said Cathy Maxwell, the Executive Director of LDAR.

“We’re very stable here. We’re not subject to some of the cyclical nature of real estate. We’re insulated and we’ve got really good diversification in our economy.”

Maxwell said people are in a tricky situation, as they must decide if they want to buy a lower-priced house or if they should wait and save up to be approved for a higher-priced home.

“The stress test is causing this sort of hesitation in the market and we do see it here in our market both in the resale…and with the new builds and the homebuilders,” she added.

LDAR is working with their federal association Canadian Real Estate Association (CREA) to push recommendations forward to the federal government to curb the impacts of the stress test.

BILD Lethbridge is working alongside the provincial and federal levels of their three-level organization.

Some of these recommendations include:

-Tailoring national programs that align with regional socio-economic factors (LDAR)

-Implementing a regional approach that is reflective of the local markets and not a uniform policy across the Canadian housing markets (BILD Lethbridge & BILD Alberta)

“The recommendations are basically to apply this policy to the markets that actually need it. We are collaborating here and trying to let the government know this is not for us,” Maxwell said.

“Real estate is local, and never before have we seen that statement so true when you look in Lethbridge, or if you go to Calgary, they’re really seeing a decline in their market.”

She said they’re also looking to have a 30-year amortization period for first-time home buyers and now, it’s just a matter of playing the waiting game on any changes to the mortgage stress test policy.