A new report by CIBC estimates Ottawa’s new mortgage stress tests last year accounted for at least half of the decline in new mortgage originations.
Benjamin Tal, deputy chief economist at CIBC World Markets Inc., says the total value of new mortgages fell by eight per cent or $25 billion in 2018.
He estimates the impact of the new stress test made up $13 billion to $15 billion of that drop.
The test came into effect last year and requires home buyers to prove that they can service an uninsured mortgage at a higher rate than they qualify for in order to receive a loan from a federally regulated lender.
Tal says while the stress test was probably necessary, regulators should revisit it.
He says it doesn’t take into account that borrowers’ incomes are likely to rise throughout their mortgage term, among other things.
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