Thank you very much.
Good afternoon to the committee members.
My name is Andy Charles. I'm the president and CEO of Canada Guaranty Mortgage Insurance Company. By way of introduction, we are Canada's only 100% Canadian-owned private mortgage default insurer, and since 2010 we have helped over 250,000 Canadians enter their homes. Our company insures Canadians, primarily first-time homebuyers, who place less than 20% down payment on their house purchase.
We take the view that Canada's housing finance system has served our country well, particularly when contrasted to other jurisdictions. Canada has avoided some of the pitfalls other countries have experienced. In part, this is due to conservative underwriting practices in the mortgage industry, strong regulatory oversight, and the avoidance of tax incentives that discourage the reduction of a borrower's mortgage debt. I believe the rest of the world looks at Canada's mortgage insurance structure as a key factor in our overall housing finance stability.
Since 2008, Canada Guaranty has supported the various government interventions that moderated the housing market as being both prudent and well considered. While these interventions have primarily targeted first-time homebuyers, they have served to strengthen Canada's housing market. However, we do believe the impact of the most recent changes, in combination with a new regulatory capital framework, are potentially detrimental to the housing market.
I would like to take a moment to describe today's typical first-time homebuyer for the committee. The average first-time homebuyer ranges in age from 25 to 40, has average household incomes of $80,000 to $100,000. The first-time homebuyer segment now represents just 30% of annual new mortgage volumes as compared to 40% in 2010. They have an average mortgage size of $300,000 and an average credit score of 753. This is a score that demonstrates a very high level of credit worthiness.
In addition, the insured marketplace has a maximum $1 million house purchase limit, a ceiling that generally precludes the first-time homebuyer from participating in the GTA or GVA markets. The headlines one reads about elevated housing market activity in Toronto or Vancouver is not and has not been driven by the first-time homebuyer.
I would like to share more specific observations regarding the recent regulatory changes and our perspective for the future.
The concept of a uniform, homogenous national housing market does not exist in Canada. Accordingly, national policy levers can be problematic when the issues are regional or even city-specific. While Vancouver and Toronto have experienced significant property value increases, Calgary, Edmonton, Montreal, and other markets most certainly have not. This requires local or regional solutions to be considered. Recent housing policy decisions taken by the B.C. government are evidence of a regional solution to a regional issue.
While it is important to reflect on the cumulative impact of regulatory changes over the years on the first-time homebuyer's ability to enter the housing market, we believe the policy changes announced in October 2016 to be the most significant intervention to date. Specifically, the elimination of low-ratio refinance eligibility will reduce choice for borrowers by impacting the competitiveness of Canada's monoline lenders. More borrowers may seek mortgage funding from private lenders representing a higher cost option and with limited regulatory transparency.
The combined implication of the Department of Finance changes of October 2016, followed in short order with the introduction of a new regulatory capital regime, will materially change the housing market dynamics in our view. Before further regulatory initiatives are considered, we need to pause to understand the longer-term impacts.
Recognizing the potential cumulative impact of these changes, we encourage the government to consider the following recommendations.
At this point in time do not proceed with a risk-sharing model. Study the results of the most recent changes before considering any more.
We now anticipate the first-time homebuyer segment share of new originations will drop to just 20% of the marketplace. I would take the view that insured first-time homebuyers are the most regulated segment in today's housing market. They are not the problem, and we take the view that any further targeting of this segment is counterproductive.
Lastly, Canada has indicated plans to welcome 300,000 immigrants to Canada next year, a policy decision that we welcome. The majority of these immigrants will reside in our major markets. We will need to house these new Canadians, and we encourage all levels of government to coordinate their actions to ensure that the necessary housing stock exists to accommodate them.
Thank you for your time.