Tougher stress tests won’t chill housing market: Scotia

By James Langton | May 21, 2021 | Last updated on May 21, 2021
1 min read
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The tougher stress test for mortgages likely won’t have much of an impact on the red-hot Canadian housing market, which signals the need to curb stimulus, says Scotia Economics.

In a research note, the bank said that the tighter B-20 stress tests announced by the Office of the Superintendent of Financial Institutions (OSFI) this week aren’t expected to have “a material sustained impact […] on the insured and uninsured mortgage books or much negative spillover into related activities like consumer spending.”

Scotia said that the increase in qualifying rates “will further harm housing affordability for first-time homebuyers in particular, but it’s unlikely […] to seriously and sustainably dent housing markets if we do indeed see employment gains returning over [the second half] after reopening while supply remains constrained.”

At the same time, Scotia also reiterated its belief that “monetary and fiscal policy are too lax given the rapid arrival of vaccines.”

Hefty stimulus was warranted when policymakers were desperate to stave off “depression and deflation risks when vaccines were viewed as a pipe dream and fiscal policy was flighty at best,” but the arrival of vaccines and the quick economic rebound means “extreme stimulus” isn’t needed.

“B-20 is best interpreted as a sign post on the road to a need for tightening up overall stimulus,” the bank concluded.

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James Langton

James is a senior reporter for and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.