Canada’s Recent Wave of Federal Regulation Failed to Effectively Address Housing Crisis
By Patrick LeBlanc @ Real Estate Daily
January 12, 2018

In the past year, Canada’s federal government has responded to an overheating housing market with multiple sets of tighter lending regulations. Unfortunately, many consumers who no longer qualify for federally insured loans are now turning to unregulated lenders.

Key Takeaways

  • Canada’s federal government has introduced multiple new mortgage rules and housing regulations in the past year
  • Consumers are turning towards unregulated lenders that are not subject to the new regulations
  • Unregulated lenders include credit unions and mortgage-investment corporations (MIC)


Housing markets in Vancouver and Toronto reached some troublesome milestones in the past year. Both markets ranked among the most unaffordable in North America. Vancouver ranked most unaffordable with a median home sale price of over $1.1 million.

Canada’s federal government has attempted to cool various markets by raising interest rates, tightening lending regulation, and enacting measures like the foreign-purchase tax. The series of changes have substantially reduced the number of Canadians who qualify for a mortgage backed by the government and priced many out of homeownership altogether.

The affected consumers, however, are not choosing to wait or sell, but are predominantly turning towards unregulated lenders to solve their problems.

“We’re transferring risk from the regulated segment to the unregulated segment of the market,” Benjamin Tal at the Canadian Imperial Bank of Commerce told Financial Post. “If we have a significant correction, clearly the unregulated markets will suffer even more because that’s where the first casualties would be. And then you will see it elsewhere.”

Mortgage broker Samantha Brookes said that her business is typically a 50-50 mix of loans from banks, and those from non-banks or private sources. In the past two months, more than 90% of her business has been setting up funding from unregulated sources. “People aren’t going to stop buying, they’ll just find different ways of doing it.”

Brookes is continuously trying to help her clients out housing debt. She’s currently working with an older Toronto couple, a 59-year old city worker and her husband, who have so much debt they stopped making payments on their $410,00 mortgage. New regulations disqualified them from refinancing, so they chose to take out a second mortgage with an interest rate of 10.5%. This suburban Toronto couple, like many others, were forced to turn towards private, unregulated lenders to stay afloat.

Insured mortgage origination had already fallen 17% year-over-year by the second quarter of last year. Today, about 49% of all mortgage are now uninsured, which is up from 36% only five years ago, Financial Post reports.