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Mortgage Brokers Accuse Flaherty Of Killing 190,000 Jobs

The association that represents Canada’s mortgage brokers is expecting a major drop in real estate-related jobs, and it’s placing the blame squarely on Finance Minister Jim Flaherty’s changes tightening mortgage lending rules.

It appears to be part of a broader effort by the industry to roll back some of Flaherty’s rules and loosen lending standards in the wake of a slowdown in the housing market.

In a recent report presented to officials in Ottawa, Will Dunning, the chief economist for the Canadian Association of Accredited Mortgage Professionals (CAAMP), predicted the country would lose 190,000 jobs between 2013 and 2015 as a result of the rules.

The report foresees losses of 70,000 jobs related to the construction of new homes, and another 120,000 related to home resales.

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Dunning told The Huffington Post Canada he expects to see house prices start to decline across the country this summer as last year's mortgage rule changes work their way through the market. He said that the rule changes have mostly affected the bottom end of the housing market so far, but he expects the malaise to spread to the higher end of the market as well.

That puts Dunning at odds with many analysts who say the slowdown in housing activity has more to do with market conditions than the effects of a one-time mortgage rule change.

TD Bank senior economist Sonya Gulati was quoted in the Globe and Mail as saying the effects of the rule changes are now fully priced into the market — meaning they shouldn’t have any further effect on sales.

The bank’s chief economist, Craig Alexander, predicted last year the rules would shave 3 per cent off house prices, suggesting that any further house price decreases -- such as those seen in Vancouver -- would have to be the result of forces other than the new mortgage rules.

And there is a question as to whether the rules themselves had much of an impact on the current housing slowdown, with evidence that some markets began to swoon before the changes were announced in June, 2012.

Some market analysts have blamed sky-high nominal house prices, combined with record debt loads, for the housing slowdown.

But Dunning says there was little reason beyond the rule changes for the housing market to decline.

Thanks to record-low interest rates, “affordability is as good as it has been in the past decade,” Dunning told HuffPost.

And he argued that record debt loads shouldn’t have an effect on the market.

“I don’t consider what [consumer] debt levels are when deciding to buy a house,” he said.

The mortgage brokers’ association is campaigning to have some of the government’s mortgage rules rolled back. Specifically, CAAMP would like to see maximum amortization periods go back to 30 years, although first-time home buyers would have to qualify for a 25-year mortgage before being given a 30-year mortgage under CAAMP’s proposal.

Dunning would not say whether he believed the government should eliminate its new mortgage rules altogether, but suggested political leaders had erred in 2006 when they loosened the rules in the first place. (Those rules allowed mortgage amortization periods of up to 40 years on insured loans. Since then, the maximum period has been pared back on four separate occasions.)

With the housing market booming in the mid part of last decade, “it was not necessary at the time to liberalize the rules,” Dunning said.

On the other hand, “this is just not the right time to roll back the rules,” he said.

As the housing market has cooled, mortgage lenders have become more aggressive in drumming up new business. Following BMO’s announcement of a 2.99-per-cent rate for five-year fixed mortgages, most major lenders have unofficially followed suit.

That’s bad news to Flaherty’s ears, who has expressed concern in recent years that Canada’s housing market may be overheating. He warned mortgage issuers earlier this month not to reinflate a housing bubble through aggressive discount lending.

Canada’s economy has grown dependent on housing jobs like never before.

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