Thank you.
Mr. Chair, committee members, good morning.
Mortgage Professionals Canada has more than 11,500 members across Canada, and I want to thank you on their behalf for giving us an opportunity to comment on Bill C-97 and the 2019 federal budget.
My name is Paul Taylor. I'm the president and CEO. With me today is Michael Wolfe, regional vice-president of residential credit for western Canada at Equitable Bank. He is also currently serving as the chair of the board of directors for Mortgage Professionals Canada.
As many on this committee know, since last year we've been asking for a number of changes to the mortgage macroprudential rules, but primarily for a reduction in the mortgage stress tests, a reintroduction of the mortgage insurance-eligible 30-year amortization for first-time buyers, a stress test exemption for borrowers who have paid as agreed to their first term and who wish to renew with a different lender, and an increase in the RRSP withdrawal limit on the first-time homebuyers plan, which was actually addressed in the budget.
These requests were made in the interest of supporting access to home ownership for younger, aspiring middle-class Canadians, whose long-term economic well-being has been disproportionately disadvantaged by the current regulatory requirements.
The federal budget contains measures that address our concerns, and our comments today will focus primarily on that subject.
First, we thank the government for implementing an increase in the homebuyers' RRSP withdrawal limit from $25,000 to $35,000. This increase is appropriate. The previous limit has been in place since the 1990s. Perhaps of even greater societal value, beginning next year the program will expand to include those who have experienced the breakdown of a marriage or a common-law relationship. We're very encouraged by this and believe it will assist people in those circumstances to find footing in a new home much more quickly. It's a good change.
The newly announced and highlighted first-time homebuyer incentive program we feel will likely not provide the support to the marketplace that is needed. Briefly, the new program aims to share equity in a home for qualifying purchasers. CMHC will own either 5% of the home if it's existing residential stock, or 10% if it's newly constructed, through a shared equity mortgage.
Because CMHC owns 5% or 10% of the home, the purchasers' monthly living expenses will be reduced because the traditional insured mortgage they take will be smaller, reduced proportionately by the size of CMHC's ownership. The difficulty we see with the program is that it doesn't assist anyone to qualify to purchase a home who wouldn't already have otherwise qualified.
Further, those who do qualify need to be comfortable with the government sharing ownership of their home. The prospective purchasers must also understand that the government will share in the appreciation or depreciation of the home at the time they come to sell it. Given that the purchasers won't require the program to qualify to purchase a home anyway, frankly, we see quite limited take-up from those who would be able to take advantage.
Additionally, the program restricts qualification to purchasers whose households earn less than $120,000 annually and limits the collective mortgage sizes to four times the actual household income. All things being equal in today's market, a family with reasonable credit would generally qualify for a traditional insured mortgage of around 4.7 or 4.8 times their household income. The new program actually further reduces the potential eligible homes, especially for those at the bottom end of the income bracket.