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Mortgage Broker News | 13 Jun 2014, 11:52 AM Agree 0
Joe Oliver responded to the critics calling for more active participation from the minister in reining in housing industry and cooling mortgage rates.
  • Dustan Woodhouse | 13 Jun 2014, 01:33 PM Agree 0
    Canada is a Free Market Country. As such I suspect most CDN's do not wish to have the Government interjecting into the private market with price controls which artificially 'protect' the consumer from low rates while simultaneously fattening Corporate profits further at the homeowners expense.

    With respect, Mr. Adatia's position seems contrary to the very essence of our system.

    Price Controls do not work, they cause larger problems which one need not look far into history to see.

    With stringent qualifying criteria already in place Mortgage Debt is hardly the issue. The arrears rate continues to fall, now at 0.31%. 99.69% of CDN's do not miss mortgage payments.

    Where are the record low rates for consumer debt? Where are the tighter guidelines for consumer debt?

    Housing needs to cease being the whipping boy in these conversations.

    Respectfully,
    Dustan Woodhouse
  • Amber Moser | 13 Jun 2014, 02:59 PM Agree 0
    By continuing to tighten criteria for mortgage lending the government is still stepping into the mortgage market. I agree with Dustin Woodhouse that consumer debt is more of an issue than mortgage debt. People always need some place to live but do they really need the brand new car or high heeled shoes?
  • Silly Rabbit | 13 Jun 2014, 04:28 PM Agree 0
    Go after the banks with their credit cards at 19% and $20k limits for 24 year olds....
  • Faye Drope | 13 Jun 2014, 08:46 PM Agree 0
    Silly Rabbit is right and this is a major issue.
  • Ron Butler | 15 Jun 2014, 03:22 PM Agree 0
    We can argue that growth of high interest rate consumer debt is bad and in my opinion it is but we need to be more thoughtful about suggesting there should be more regulation of consumer debt. There is zero government risk in consumer debt in Canada. That is not true of mortgage debt which has several government backed programs both in the foreground and background.

    If consumers default on credit cards and car loans the government is not at risk. So even though we may collectively think credit card interest should be capped and consumer debt should be curtailed it is 100% a free enterprise outcome. So far all the companies offering credit cards and PLOCS and auto loans seem pleased with the returns and more consumers are happy with these products (we all love our Point Cards) than are angry at them.

    So while there is little doubt 20 year olds may not need $20K limit credit cards I am not sure if we should be ones to insist they can not get them. I think the marketplace will adjust to the correct level on that issue.
  • Daniel McKay | 16 Jun 2014, 02:02 PM Agree 0
    I'm typically in favor of governments not interfering in markets that are capable of regulating themselves as well. However, there are instances when they need to step in when a market or significant player in the market is out of line. One of the few things I will ever praise Flaherty for, is stepping in when he knew that certain institutions dropped their rates into loss leader territory. If you understand the relationship between bond yields, fixed mortgage rates, and mortgage profitability, Flaherty's rate interventions make perfect sense. When he stepped in, it was when those institutions were offering fixed rates that put those mortgages themselves at a loss to the lender. That's why they were always tied to cross selling of other products, they had very restrictive terms, and were certainly used as a "bait and switch" tactic. The low advertised rates brought the clients in, but many of whom ended up getting a higher rate, or different term and rate entirely. Flaherty rightfully stepped in in those situations. In fact, I don't think it would be a bad idea for the government to legislate a rate floor tied to an appropriate minimum spread over the corresponding bond yields / BOC prime at all to prevent the practice in the future.

    To say that the government should stay out of consumer debt just because they are not directly on the hook in case of default is naive and foolish. Consumer debt levels are a huge societal problem in this country. I'll save you all the long rant as to why, but it should be pretty obvious anyway. The consumer debt market has clearly proven incapable of regulation itself, that's why consumer debt levels are as high as they are. How sad of a country will Canada be when the consumer debt bubble bursts in 20-40 yrs devastating the economy just because we did not have politicians willing to step in and fix it now.
  • Ron Butler | 16 Jun 2014, 02:28 PM Agree 0
    @ Daniel McKay ..... we can agree to disagree about credit card and other consumer debt issues but your suggestion that the financial institutions who offered sub 3.00% 5 - year fixed rates last year were experiencing net losses by offering those rates is simply wrong. Billions of dollars worth of sub 3.00% 5 - year fixed rate mortgages were booked last summer and a review of the big 6 banks quarterly statements showed significant profits on all of their retail mortgage books. Banks don't offer mortgage rates they lose money on. Last year Mr. Flaherty 's intervention was based on property value run-up due to low interest rate offerings, it had nothing to do with the profitability of the rates. Even Investors Group's offering of 1.99% 3 - year Variable recently was hedged to not lose money on the mortgages.
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