BoC official warns that government is overexposed to housing market

BoC official warns that government is overexposed to housing market

BoC official warns that government is overexposed to housing market A senior official from the Bank of Canada is warning that the government is overexposed to the housing market. Deputy Governor Lawrence Schembri notes that the market is currently secure with the forecast for more balance when interest rates increase; but he says a sharp rise in unemployment or other economic shock could be costly for the government, especially with the level of risk carried by CMHC. Schembri says that things have to change with high levels of consumer debt being a major worry, and he has repeated calls for the private sector to take on a greater proportion of the risk. Read the full story.
12 Comments
  • Angela Wong-Liao - Invis 2014-11-06 10:26:47 AM
    I fully agree with our BoC Deputy Governor Lawrence Schembri, the very high levels of consumer debt and very high debt to income ratio are vulnerable to economic risks, especially our government owned mortgage insurance agency, Canada Mortgage and Housing Corporation (CMHC). Any future economic shock, ie: rise in unemployment, external political instability, decrease in foreign investments and other economic shock can create a major risk to our real estate value, especially to CMHC.
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  • Tony Piattelli 2014-11-06 1:38:21 PM
    I don't necessarily agree that the increase in consumer debt ratio is driven by the mortgage industry, but has more to do with the unsecured credit such as credit cards, unsecured lines of credits and auto sales which are not as regulated. They focus on the housing market because they are able to regulate it where they aren't as able to legislate the unsecured market. Remember people have to qualify for a mortgage within the guidelines whereas they don't have to qualify for car loans or credit card debt as they are credit scored. Focusing on the wrong area of debt. By the way an major economic downturn will impact the mortgage industry we saw that in the 80s...but not so much in 2008.
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  • Kuldip S Panesar Homeland Mortgage Corp. 2014-11-06 3:00:07 PM
    I do not agree with this, the mortgage industry is regulated by the Government and Bank of Canada and intervened by them from time to time . The need is to regulate the unsecured debt , like credit cards, car loan and unsecured line of credit. Mortgage is approved if the borrower qualify as per the guidelines set for the mortgage Governing bodies . Secondly principal amount of mortgage is reduced with each and every installment paid by the clients . Whereas other unsecured loans and line of credits are not. The need is to regulate the unsecured financing . No doubt major economic shock will have some effect on the mortgage industry but not as have been stated .
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