Access to cheap money to buy housing just increases the proportion of money people spend on housing so in general making a mortgage less accessible and reducing overal housing price and % of money spent on housing overtime is a good public policy.
This is especially clever as simple increases to interest don’t really affect the total amount of money spent just shift the balance between the interest payment and the capital payment. So this puts owners at risk due interest changes increasing their payments while at the same time decreasing the asset value.
By making the stress test tougher you decrease the total pool of money available to purchase houses which given constant demand would lower prices. The risk is that it begins to restrict supply. However so long as construction costs are being covered and it’s just land acquisition costs that are pressured lower supply should hold up pretty well
The problem is that this penalizes all existing homeowners in favour of future owners so if we are doin it we need to do it quick before the boomers sell their homes. (Might already be too late)
I think another thing to look Would be to change the stress test into a curve instead of a linear line of x% of income. Your expenses don’t increase linerly with income so you should be allowed a much lower percentage of mortgage on your 1st 50k of income than the 2nd 50k of income.
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