January 22, 2020
Partner Michael Feldman’s paper published with the C.D. Howe Institute has been featured by the Globe and Mail. The paper discusses strategies the federal government could leverage to make longer-term mortgages more attractive to banks and the benefits it would reap: greater consumer choice and financial stability.
Michael discusses how the current five-year mortgage period “is too well-entrenched to be overcome organically without incentives or changes to laws or government policies and programs to encourage this development”.
Michael suggests that one of the ways to shift demand towards longer-term mortgages is relaxing the current stress test against borrowers.
“Since the main purpose of the stress test is to predict the ability of borrowers to continue to service their mortgages if they must renew at maturity at a higher interest rate, it would be logical to loosen the stress test for borrowers willing to fix their rates for terms longer than five years”, Michael writes.
“This would encourage them to seek out longer-term mortgages and require lenders to offer competitive rates to retain market share”.
Check out the full feature from the Globe and Mail.
Read Michael’s full paper published with the C.D. Howe Institute.