BoC hints at mortgage tightening

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The Bank of Canada believes regulation and supervision – not monetary policy – are the keys to aiding economic recovery. Is this a hint at further housing finance tightening?
“We have made it clear that household imbalances are at the top of our list of vulnerabilities. But monetary policy is not the primary tool to address these risks,” Carolyn Wilkins, senior deputy governor for the Bank of Canada said in a speech Monday. “Regulation and supervision, along with targeted macroprudential actions, are more effective lines of defence.”
While Wilkins doesn’t outright point to mortgage rule tightening, her footnotes following a statement that “defences have been strengthened a number of times since 2008” point to exactly that sort of tinkering.
“The Minister of Finance has tightened mortgage insurance rules, the Superintendent of Financial Institutions has developed stronger mortgage underwriting principles and the Canada Mortgage and Housing Corporation has improved its programs,” the footnote and the end of the speech transcript reads.
This, however, follows Finance Minister Joe Oliver’s statement that the government will not make any rash decisions when it comes to reining in the housing market.
“We’re looking at things, but we’re not going to be doing anything dramatic,” Oliver said in an interview in Cairns, Australia on Friday, according to the Financial Post. “We don’t see the need for it.”
Wilkins’ speech was given about the underwhelming economic recovery seen since the 2008 recession.
“Our approach is to consider the main sources of uncertainty in our deliberations on how best to achieve our inflation target,” Wilkins said. “This helps us avoid making big errors that are difficult to correct.”
  • Lisa Holly on 2014-09-23 1:14:00 PM

    Financing guidelines are tighter than I have seen in 24 years of lending.

    Why not take a look at credit card debt first and limit those interest rates, give the public a bit of breathing room and a break from the mortgage lending nightmare we have experienced since 2008.

    We all need a break.

  • Janice Ashworth on 2014-09-23 2:26:32 PM

    I agree with Holly. The government needs to take a thorough look at Credit Card rates and limits. I personally had 3 credit cards from one institution that started with $5000 limits and were automatically increased to total credit available of over $100,000 at 18% or higher. This is a much bigger problem than our mortgage standards. Most people pay their mortgage before their credit cards when times get tough.

  • John Van Driel on 2014-09-23 2:45:24 PM

    Absolutely agree with the two ladies above. Where are CAAMP and IMBA when it comes to representing us to the Government Agencies who seem to be ignoring rampant credit card indulgency!!

  • AM on 2014-09-23 3:45:04 PM

    I also agree very strongly with the comments above. But I believe that car Loans that are so easily accessible should also be scrutinized. It is the "outside debt" load that most individuals have problems with. As Lisa Holly said above the borrower(s) will pay their mortgage before the credit card debt and unsecured loans payments and then their car loans.

  • Pam Nierlich on 2014-09-24 8:59:57 AM

    Credit Cards and unsecured line of credits with interest only payments are a big problem but lately I have seen some nasty trends in the car industry. 8 year amortizations on used vehicles, $40,000 income and a $54,000 veh loan, something wrong with that picture. Imagine the uproar if the government stepped in and restricted the amort of veh loans and set ratios of veh payments vs income.

  • Ron Butler on 2014-09-24 11:03:16 AM

    Please remember car loans, credit cards and personal LOCs are all area's that the government has zero involvement in other than regulate maximum interest and contract law. They are truly consumer products. The government is intimately involved in the mortgage business through CMHC and the federal backing of the other mortgage insurers. Likely we should stop lobbying for changes in lines of business we have very little to do with and focus on mortgages.

  • Layth Matthews on 2014-09-24 12:49:08 PM

    The other day while driving I said to my wife, "look at that nice XLE." and she replied, "yes, but ours is an APO (All Paid Off)."

    Just to add another dimension, vehicle loans are tough to regulate because access to vehicle ownership is often access to employment.

    Ironically, it's materialism that is the biggest obstacle to material wealth and well-being. It's hard to regulate the materialism out of people.

  • Angela Wong-Liao - Invis Inc on 2014-09-28 5:03:34 PM

    I fully agree that we have very tight mortgage rules and regulations, any further tightening can directly negatively affected our mortgage businesses. I hope our finance minister and OSFI think carefully for any further tightening. Mortgage financing and real estate is closely related and real estate prosperity is the heart of our country's economic prosperity.

  • Kuldip S Panesar Homeland Mortgage Corp. on 2014-09-29 3:09:19 PM

    Existing mortgage rules and regulations are very tight. Any further tightening of rules will have negative effect on the real estate industry and economic activities of the country. Federal Government and B O C will consider all consequences before taking any further step in this regard.

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