The Canadian government doesn’t favour allowing longer mortgage terms, but it is monitoring whether the mortgage stress test is having the desired effect, Prime Minister Justin Trudeau said.
When asked about raising the maximum mortgage amortization for first-time buyers to 30 years at the Canadian Home Builders’ Association conference in Niagara Falls on Thursday, Trudeau said that he instead wants to introduce a program that sees the government take a stake in some home purchases and increase the funds that buyers can take from retirement savings.
“Which is why, when we looked at all the different measures we had, we really, really liked the shared equity program,” he said.
Trudeau agrees that a 30-year mortgage can lower payments on a monthly level, but he said that, overall, it increases the amount borrowers are going to pay out in interest over time.
“We’re looking at things that are not going to disrupt the market in unexpected ways,” Trudeau said. “We’re listening to everyone about their concerns, and we are going to keep watching that stress test and make sure that it is having the desired effect, but we are seeing fewer and fewer people take on those overreaching debt-loads, particularly in the higher sectors of the market.”
The country’s housing market has been a preoccupation of policymakers for years – grappling with price surges in Vancouver and Toronto. Trudeau said that his government tried to take measures that would stabilize Vancouver and Toronto but not have an overly negative impact elsewhere across the country, according to a Bloomberg report.
The stress test was about “taking some of the froth out of those markets but also ensuring that people weren’t stretching themselves further than was wise, particularly given the fact that we can see interest rates rising in the future, and recognizing Canadians carry a high level of personal indebtedness that we need to respond to,” Trudeau said.