Home prices are at an all-time high and mortgage rates are at an all-time low, leading many pundits to wonder what, if anything, the Canadian government will do to rein in the industry. One leading broker has an idea that doesn’t involve regulation changes.
“There are limits to what you can do with regulations and we have a tendency to go to change legislation when there’s a problem,” Layth Matthews of RateMiser Mortgage Advisors told MortgageBrokerNews.ca. “What we need government to do now is provide models and education for sustainable lifestyles, not try to predict house prices and enforce interest rates.”
According to Matthews, a prevailing desire to own more than is required is one reason for the exorbitant house prices and smarter saving and spending habits will lead to a higher degree of financial literacy among Canadians.
“There is just a tremendous amount of pressure to buy things and to consume and one of the key truths to financial success is just deferred consumption,” Matthews said. “You will actually have a lot more money and a better life if you don’t spend beyond your means.”
It’s a stance the OECD agrees with, with its latest economic survey, released Thursday, pointing to high debt levels as a warning sign that could negatively impact the Canadian economy.
“Regardless of whether or not a housing price bubble exists, very high household debt levels represent a major vulnerability,” the report states. “Household debt began trending upwards in the mid-1980s from a level of 60 per cent of disposable income to reach a record high of 166 per cent in mid-2013.”
According to the organization, residential mortgage credit has been the main driver of the debt increase over that period.