Canada Should Revisit Mortgage Rules as Housing Cools, CIBC Says

Transfer of risk to unregulated lenders wasn’t B-20 goal: Tal
Alernative lenders now account for 12% of transactions

Homes under construction are seen in this aerial photograph taken above Brampton, Ontario, Canada, on Saturday, Sept. 9, 2017. Toronto home builders are showing no signs of concern about the city's housing market. New construction has averaged just over 42,000 annualized between January and August, the highest first eight months of a year since 2012.Photographer: James MacDonald/Bloomberg

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April 16, 2019 at 12:07 PM EDT

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One of Canada’s largest banks is calling on the federal government to reconsider controversial new mortgage rules, as the transfer of risk to unregulated lenders potentially makes the market riskier than it appears.

The introduction of a 200 basis-point stress test on new mortgage lending as part of the so-called B-20 regulations accounted for as much as 60 percent, or C$15 billion ($11 billion), of the C$25 billion decline in new mortgage originations last year, according to Toronto-based Benjamin Tal, deputy chief economist at Canadian Imperial Bank of Commerce.

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