The Real Estate Intelligent interview series features BC’s most prolific professionals shaping the local real estate industry.
AN INTERVIEW WITH SCOTT GINGLES, FOUNDER & MANAGING DIRECTOR, NEST MORTGAGE
Part 5 of 5: Government
B-20 was devised in 2016 with the intention of cooling the market, however, in today's housing market it appears to have a different impact. Ryan Lalonde asks Gingles to explain his perspective on B-20, as well as other government intervention measures that have been witnessed throughout Canada's real estate markets.
RYAN LALONDE: How much of a risk does an intervention like B-20 pose to our marketplace in the future?
SCOTT GINGLES: So, for those who don't know, the B-20 qualification guidelines are that we have to qualify at the lower of 5.25% or the contract rate plus 2%. This is a new change and a slight uptick meant to address the white-hot real estate market and an accelerated borrowing that has happened over the last 12 months.
In general, my view on it is that it will have little impact on cooling the market. Like we said previously, Canadians are very resourceful and will source the shortfall for the 5% reduction in other ways, such as co-signers or sourcing equity from family or other properties.
RYAN LALONDE: Is there anything that you are thinking about for the next 12 to 24 months that will continue to put downward pressure on pricing other than the expectation that rates do increase slightly over time?
SCOTT GINGLES: Well, it's interesting that the government is very focused on affordability - they want new home buyers in the market, but it is getting increasingly difficult to qualify. Not too dissimilar to the tax intervention of years past, we saw OSFI introduce tighter qualification rules on June 1st, making it even harder for qualifying for a new mortgage. OSFI also cited responsible underwriting guidelines to make certain Canadians can afford their mortgage payments when rates rise. Will they rise to that contract plus 2% or that 5.25% level? In my opinion, not in the next three to five years.
The market slowed slightly in the first few weeks of June, but I don't think it had much to do with the new qualifying rate. The new benchmark has less than a 5% impact on borrowing power which is not significant. As you covered in your recent presale pulse, sales are tapering but mark activity is still very strong.
As we trend towards a more balanced pre-sale and resale market, record low-interest rates will continue to support sales and activity, and we’ll have sustained appreciation valuations for some time to come long term.
What is the best mortgage product to consider right now in the marketplace?
Right now, variable. It’s the rate and it provides maximum flexibility.
What does a five-year variable rate at in the future?
Good question. In the next 18 to 24 months 2 to 2.5%
What's the next big thing that will impact lending?
Syndicated mortgages where the lender participates in ownership and appreciation of the home.
What’s keeping you up at night right now?
My kids.
Name one possession that you absolutely could not live without today and how is it different from pre-COVID?
I think you know this answer. The one thing I can't live without is my bike. I’m just happy to be out there and getting active and seeing the province open up.
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