Brokers applaud tough-talking Scotia CEO

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Scotia’s CEO Richard Waugh is receiving a rare show of support from the broker channel, after stating finance minister Jim Flaherty should stop interfering on mortgage rates.
“I would have to agree with Mr. Waugh’s remarks,” says Ian McSevney, president of Mortgage-Advisors, Altmore MIC. “The markets are dictating the mortgage rates, albeit within the confines of the Bank of Canada's rate policy. So the government getting involved in product pricing is philosophically wrong. It would mean the government is interfering in the individual banks product pricing – which would be unfair to the mortgage consumer.”
Waugh was attending the annual shareholders meeting in Halifax Tuesday, when he told the Financial Post that although he understands why the finance minister is concerned about the economy, he doesn’t feel the government should be setting product pricing.
“Despite the difficulties of central banks to use interest rates, the alternative of trying to manage specific products or prices, to me, is fraught with difficulty,” Waugh told reporters.
“I personally think that the finance minister should stay out of the industry pricing for mortgages,” says Bill Harries of The Mortgage Centre, Sky Financial Corporation in Edmonton. “I understand Mr. Flaherty’s concerns, but it’s an area that I don’t think that the government should get involved in and should let the market price it’s self accordingly.”
McSevney is also sympathetic with the finance minister’s concerns, but feels the banks are responsible.
“I too understand that Mr. Flaherty is concerned about the Canadian economy as we all should be,” adds McSevney. “The government does have a job to do as a regulator and already works to regulate rates through the Bank of Canada's rate policy. We have a pretty long history now of the use of securitization through mortgage-backed securities in the Canadian marketplace which ties mortgage rates to bond yields.
“The banks simply would not be offering a rate to the Canadian consumer that they could not afford to offer.”
In fact, Waugh did allude to the possibility of Scotia expanding their unsecured lending, citing stronger than expected credit card and personal loan portfolio. But Harries sees this as a prime example as to how the government needs to apply the same rules to all types of lending.
“As for unsecure credit, I think that the same lending guidelines used for applying for a mortgage should be used by all institutions for TDS ratios regardless of the type of credit, loans or credit cards approved,” says Harries.
Finance minister Flaherty has been in the news repeatedly throughout the month of March, first publicly chastising BMO for lowering its posted rate to 2.99 per cent, then having his department contact Manulife when that lender lowered its rate to 2.89 per cent, crossing Flaherty’s rate Rubicon.
Manulife reversed its posted rate change back to 3.09 the following day.
For McSevney, he feels the true restraint on banking behaviour should come from the shareholders, not government.
“I think it would be up to the shareholders of the individual banks to complain if they were unhappy with the rates that were being offered, not the government,” he told “The government has already done its part putting in place the benchmark qualifying rate.”
  • Russ Cameron on 2013-04-11 9:29:43 AM

    I think our federal gov't is missing the point totally.. we should all want the lowest borrowing rates possible..tell me why we are regulating low mortgage rates and not dealing with the big problem the extremely high rates and amount of debt in unsecured credit card debt..people need homes..should they all keep renting and get need work, suppliers need sales..why don't we deal with that problem as at 19% it hurts the people the most.

  • Paolo Di Petta | on 2013-04-11 1:18:19 PM

    @Russ Cameron - we should all want the lowest borrowing rates? We've HAD the lowest borrowing rates in history and now our debt-to-income ratio is 165%. In what world is that good?

  • Russ Cameron on 2013-04-11 1:34:14 PM

    Ok low rates are what consumers point is common sense 19% or 3% which do you think should be monitored. If the Gov't wants to control or monitor mortgages increase the rates don't alllow the Credit card lenders they can charge anything they want (19.9%) and monitor the 3% mortgages..I've already wrote to my M.P. who agrees that credit card debt consumers biggest problem now..have a look at Greece// Thanks russ

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