We may be mortgaged to the hilt, but Canada’s loan default rate is still tiny: Just 0.3 per cent. We’ll do anything to ensure we don’t miss those payments. We juggle credit cards and car loans and postpone paying our home equity lines of credit, but that doesn’t help with our overall debt level, which hit a record high at the end of last year — we now collectively owe 178 per cent of our disposable income.That makes many households vulnerable to disaster if someone loses a job or interest rates climb. It also puts Canada’s future prosperity at risk. That’s why Canada’s bank regulator introduced a stress test 18 months ago that makes it harder for cash-strapped home buyers to qualify for a mortgage — and why, in an unusually blunt letter to the Standing Committee on Finance last month, Canada Mortgage and Housing Corp. CEO Evan Siddall vigorously defended its role in protecting us against dangerous debt levels related to our homes.But that mortgage lending test has also been blamed for a slump in the Toronto region housing market, with builders, lenders and realtors accusing it of needlessly shutting out first-time buyers and handcuffing move-up consumers to their current bank. The trickle-down effect, they suggest, is stunting the housing supply at a time when Ontario, at least, is desperately short.It’s an important question: Is the stress test smart government policy that’s helping to bring a frothy housing market under control — perhaps even preventing a devastating housing crash? Or is it too heavy-handed, dampening the economy and making it even harder for regular Canadians to buy a home?Housing will almost certainly be a central issue in the October federal election and the Toronto Real Estate Board (TREB) will be watching where the parties stand on lending policy, mortgage products and amortization, said the board’s chief market analyst Jason Mercer.He is among those who wonder ...
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