Mortgage stress testing did more than just make it tougher for many Canadians to purchase a home — it also eroded their confidence in the housing market.
But Canadians seem to be regaining their confidence, more than a year and a half after policymakers introduced stress testing for uninsured mortgages.
So suggests the latest Bloomberg Nanos Canadian Confidence Index, a timely barometer of Canadians’ perceptions of the economy, including real estate.
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Every week, Nanos surveys 250 Canadians by telephone, asking them questions on subjects including personal finances and real estate price expectations in an attempt to gauge “the economic mood of Canadians,” as the pollsters put it.
The index clocked in at 58.6 by July’s end, increasing from 58.3 a month ago and nearing a 12-month high.
Anything above a rating of 50 suggests Canadians have a generally positive view of the economy, whereas anything below appears to indicate an overall negative view.
In a writeup discussing the index results, Bloomberg credits recovery in the housing market, and Toronto and Vancouver in particular, with the more optimistic index reading.
“Renewed momentum in Canada’s housing market is buoying consumer optimism,” reads the Bloomberg article.
“The measure is probably benefiting from a rebound in economic growth, lower borrowing costs and easing concern about a major housing correction,” Bloomberg editor Chris Fournier continues.
Some 43.2 percent of those surveyed expect real estate values in their neighbourhood to be higher in the next six months.
The last time Canadians had such a rosy view of the market was in December 2017. The very next month, new stress testing began for uninsured mortgages, meaning even borrowers with downpayments of 20 percent or more were subject to more stringent lending regulations.
Specifically, these borrowers have to prove they can keep up with monthly payments even if their mortgage rate is 2 percentage points higher or matches the Bank of Canada’s benchmark rate — an average of the six biggest banks’ posted rates — whichever is higher.
That took the wind out of the sails of Canadian homebuying activity. But with sales activity in Toronto and Vancouver posting double-digit year-over-year growth last month, it appears the tide is changing — and with it, the economic perceptions of Canadians.
“It’s a stark turnaround for Canadian consumer confidence, which until May had been in a rut,” Fournier says.