Economists say the federal budget doesn’t include enough measures for improving housing affordability

According to real estate experts, a new mortgage code of conduct announced in the federal budget is good news for Canadians dealing with financial difficulties. However, they believe the economic plan doesn’t have enough housing affordability measures.

The code of conduct introduced on Tuesday aims at making sure that federally regulated financial institutions will provide fair access to mortgage relief measures for those who struggle with keeping their homes amid high interest rates.

It should protect such people from unnecessary penalties, internal bank fees, or interest charges. In addition to it, the new rules will let them increase their amortization period beyond 25 years, adjust payment schedules and make lump-sum payments.

It will be useful for variable rate mortgage holders facing financial difficulties, says Sherry Cooper, Dominion Lending Centres’ chief economist.

“In case the banks can increase the remaining amortizations during mortgage renewals, it will reduce the pressure on borrowers’ pockets”, – she noted.

Nevertheless, Cooper believes the overall budget doesn’t provide necessary measures for improving housing affordability, focusing more on the list of previously taken measures.

The following initiatives from last year’s budget were included in a new one: an introduction of a tax-free savings account for first-time homebuyers in April, a two-year ban on buying residential properties by non-residents, and the $4-billion Housing Accelerator Fund for building at least 100,000 net new homes.

Douglas Porter, chief economist at BMO Capital Markets, calls the last year’s economic plan “the housing budget” as housing affordability was the main topic back then.

“It seems that the focus has shifted this year,” – he said.

“Real estate isn’t a top priority in this budget. It almost wasn’t mentioned.”

Since the last budget was announced, Canada’s real estate market has faced a significant adjustment, caused by sharp interest rate hikes (8 times in less than 1 year) and a 15-20% home prices decrease.

“However, the affordability hasn’t really improved during the previous year,” – Porter noted.

According to the Canadian Real Estate Association, the national average home price was $662,437, marking an almost 19% annual drop. Meanwhile, on a seasonally-adjusted basis, the number reaches $634,830, which is 1.7% higher than in January.

As home prices in the Greater Toronto and Vancouver Areas keep exceeding $1 million and many are struggling with the higher costs of borrowing, many have called for extra measures on housing affordability and mortgage supports.