Federal policy changes made with the intent to cool housing prices and demand continue to impact housing markets across Canada with cascading consequences and pressures, according to the Annual State of the Mortgage Market report from Mortgage Professionals Canada (MPC).

According to Paul Taylor, president and CEO of MPC, the slowdown experienced in various housing markets across the country is more pronounced than anticipated. “We are seeing downward trends and/or depressions in areas like the resale market, the outlook on employment in the housing construction sector, and a continued decline in rental vacancy rates,” said Taylor, in a press release. “Federal policy changes are disqualifying potential first-time homebuyers and creating immense pressures on the rental market which is in turn driving rental prices higher. It is a spiralling problem.”

The report finds that improper policy levers can continue to depress the market, and finds that a more reasonable stress test level and lending restriction reforms are now necessary to provide more balance for borrowers and policymakers, thereby improving housing affordability, as well as the country’s economy.

“While the government has been focused on borrowers and interest rates, the reduction of activity in the housing market and extremely low rental vacancy rates will impact not only costs to first-time homebuyers and all renters, but also impact employment and the overall economy,” added Will Dunning, chief economist for Mortgage Professionals Canada and author of the report. “As a result of these policies, the economy will be weaker than it needs to be.”