Finance Minister discusses potential measures

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Finance Minister Joe Oliver, who is currently in meetings with his provincial finance minister counterparts, has said the government may take steps to rein in an overvalued housing market.

“In terms of household debt and the real-estate market, this is a subject, of course, we’re monitoring very carefully,” Oliver said, according to the Canadian Press. “So, we’re not going to take any dramatic steps in that regard, but we may take some moderate steps.”

Oliver, who took over for the late Jim Flaherty in March of this year, has said from the outset that monitoring the housing market will be a priority.

"Our government has taken action in the past to reduce consumer indebtedness and the government's exposure to the housing market," Oliver told CTV News on in late March. "I will continue to monitor the market closely."

The Finance Minister remains mum about what measures would be considered.

“Our longer-term objective is to reduce the government’s exposure to the mortgage market and we keep that objective in mind going forward,” he told CP.

The Bank of Canada recently took a stance on the state of housing prices, saying it believes the Canadian housing market is 10-30 per cent overvalued. However, the Governor of the Bank of Canada, Stephen Poloz, has also said he does not fear a housing crash.

“The risk comes when some catalyst sets off the vulnerability,” Poloz said on Thursday. “In this case it would be, let’s say, a rise in unemployment, a significant one, where it makes people have difficulty paying for their mortgage, or a rapid rise in mortgage rates, neither of which we’re expecting.” 
  • kac on 2014-12-15 12:30:52 PM

    the comments of reducing the govenments exposure to the housing market is right on the nose,as for the action of reducing consumer debts i just don't see it. It may be next to impossible for the average Canadian to obtain a mortgage or buy a house but it sure hasn't gotten any tougher to obtain a high rate credit card,loan through a finance company or unsecured line of credit. Im sure the finance minister must see some sense to making it next to impossible to get into the most secured of all debt and still be relatively easy to get auto loans that carry $1000 payments. Im sure the economy will flourish with tat mentality.

  • Ron Price/DLC on 2014-12-15 12:53:30 PM

    Well said Kac,
    Let's hold our collective breath and keep all fingers crossed he doesn't lower the LTV further for refinances b/c it's already down to the conventional level nor increase the minimum down payment (irrelevant) b/c as you said secured mortgages are not the problem (exclusive of secured LOC's of course), it's unsecured consumer debt, which he does not have the will to do anything about (a la banks back pocket). Feels like we are preggy (expectant) again...lol.

  • Layth Matthews on 2014-12-15 1:02:25 PM

    The housing market is always 10-30% over or undervalued, just based on the geo-economic diversity of this country.

    A rapid increase in unemployment would be followed by a rapid decrease in the prime rate. Fixed rates would tend to be softer too, unless we had...

    A rapid rise in fixed mortgage rates driven by US economic strength. But a strong US economy would tend to strengthen Canadian employment and wages over the 2.5 year average period in which fixed rate mortgagors would be adjusting.

    The only scary scenario is the one we just had in 2008 (seems like yesterday!) where the economy stalls and yet rates spike temporarily, driven by risk aversion. And then the government exacerbates the the situation with 4 years of austerity measures - e.g.restricting the availability of VRMs at their most helpful time in history. (Mind you it does create an incentive to keep your ratios down, so you can qualify!)

    Long before setting policy, the government should commission research, to tease out the the relative well-being associated with lower GDS/TDS ratios. Keep talking about the results.

    The current ratios we have are good for qualification purposes, but they amount to bondage to the financial sector for anyone but investors.

    If people don't see the sense in it themselves, there is no lasting benefit in restrictive policy. The next government will just change it. The best case scenario is liberal policy with a sophisticated population. Then households will have the ability to reposition themselves (with the help of a good mortgage broker), whatever storms may come.

  • Steve on 2014-12-15 2:05:52 PM

    You know what is overvalued? Rents - as long as clients pay $500 more to rent than own the equivalent, we will see high prices. Government can take the pressure off rents by making more low income housing, subsidized housing etc. It is unbelievable how hard government makes being a landlord, how hard it is to get funding/ loan support to do high density housing etc. I love how they blame the consumer.
    As for CMHC, this has been a cash-cow. Charging higher lender user fees and reducing the number of houses a consumer can have will push banks to consider the private options, but who thinks putting housing insurance into the hands of the private sector is a good idea?
    If the concern is exposure, then stop spending all the CMHC money.
    If the concern is over valued market, then help with rents or help build some high density housing.
    If the concern is house hold debt then make all these 0 payments for 1 yr cards illegal, make loans more affordable and make consumers more responsible for credit card max limit. The industry is acting like predators on people who don't have self control to save up enough money to buy anything.
    Government is seeing the problem with the wrong glasses

  • Ron Price/DLC on 2014-12-15 3:09:49 PM

    Steve we are a nation w some 36 million citizens and our governments have zero housing policy or vision except for very minimal public housing. PATHETIC. Our population deserves better, much better.
    We do have a collective voice though b/c of social media and the internet Someone needs to start a 'community' awareness/uprising to get this subject/need on the agenda so that we can vote for those politicians who are pro affordable housing and housing which meets specific needs.

  • Paul Therien - CENTUM on 2014-12-15 4:33:11 PM

    We have been talking about governments exposure to mortgages for some time now, including calls for CMHC to be privatized. Although there may be some benefits to that, we need to remember that the government also provides guarantees to both of the current 'private' providers - it would be safe to assume that this government backing would continue should CMHC be privatized.

    Rent control is something that has been explored by many cities and it is still a hot topic for many people. Cities like Vancouver are a prime example where social housing has become a serious challenge. All of that being said, for most renters the cost of a home, if rent controlled, will not impact them due to the standardized requirement that the rents be 30% of gross income. For some renters that would actually increase their cost of living.

    We are seeing situations where rental buildings are being built, the challenge for some areas is the cost of land and construction. If we look at Vancouver as another example, there have been several building put up in the downtown/west end that are either 100% rental, or are 50% rental. IN these situations even with the government subsidizing the land cost, the overall cost to construct is high. That combined with the demand of tenants that these building be "high end" creates affordability issues for the average, and when the units are released they also drive up average rents.

  • Angela Wong-Liao - Invis on 2014-12-15 5:10:44 PM

    CHANGE IS IN THE AIR!!!

    Its inevitable because of the on-going increase in market value and consumer debt loads.

    How much government intervention is to be seen but I believe that our government will proceed with utmost caution as they do not want Canada plunging into recession, similar to America after the financial crisis in 2008.

  • kac on 2014-12-15 5:47:58 PM

    the funny thing or not so funny thing about the US is yes their ending practices saw them put the economy at risk as well as the real estate market however Canada has never been a lender like the US and has always been a lender of caution. The US economy has since become much stronger evidenced by the dollar and is now even lending again with as low as a 3% down payment while Canada continues to build no real momentum.

  • Ron Price/DLC on 2014-12-15 6:36:33 PM

    Well everyone I'm all for CMHC being privatized.
    After all it's mission at inception was to operate as a lender insurer as a last resort, not the insurer of bulk bank mortgages etc., on the scale it has become. This is what is wrong. Bulk insurance to pander the big banks. My very first job was w CMHC in the 70's and back then they did a lot of direct lending to the mining companies in northern Ontario and other provinces and were then meeting their mandate although they had slipped into insured lending of prime deals. It simply has gone too far and the pendulum needs to swing back. Genworth is huge and very capable of meeting the needs of Canadians + the other private insurer. If CMHC increases their premiums as predicated, and the private insurers (for the very first time) do not follow, then mortgage lenders will start shifting more to private insurers because they are cheaper right? In the consumers best interests right? NOT. Well at least the banks won't and if they don't then hopefully the mono lenders will seeing a pricing advantage they can pass on to the market to attract more market share.
    Should be a very interesting year next year.
    Happy Xmas & New Year all.

  • Larry Invis on 2014-12-16 1:00:12 PM

    Why not impose a minimum payment on credit cards of 3% for balance of $1 and 50% of card limit; then 5% minimum payment for 50% to 75% and 10% for balance over 75% of limit. Upon receipt of monthly statement the minimum payment rule would act as a usage moderator. Also pass a law that a maximum of 3 cards per household is allowed. Make the law in such a way that if a card issuer is caught issuing a forth card per household a minimum $1,000,000 fine is imposed to the card issuer. Make the card issuers responsible. I receive one card solicitation per week at home. I use my credit card each month and pay the entire balance each month to avoid hefty interest charges. As a mortgage agent I am sick and tired to see governments constantly blaming the mortgage industry for high level of debts. The problem is too many credit cards and unsecured line of credit. Governments should leave the mortgage industry alone and go after credit cards issuers. Of course banks; credit unions and the card issuers make huge profits who pay income taxes. As usual Ottawa cannot tackle the real problems and blames Canadians for borrowing too much.

  • Steve on 2014-12-16 1:03:09 PM

    amen Larry. amen

  • M. Robertson on 2014-12-16 1:26:42 PM

    @Ron Price... Ron... you need to better educate yourself on the history of housing legislation in Canada. Here is a great summary of the actual facts surrounding mortgaging in this country:

    http://www.canadamortgage.com/articles/learning.cfm?DocID=37

  • Ron Butler on 2014-12-16 1:57:57 PM

    I am completely opposed to the privatization of CMHC. There was a crucial 6 month period at the height of the financial crisis when the feds through CMHC were pulling many levers that were critical to Canada's successful navigation of the WFT. Why would we give that up? It's a profitable organization that delivers dollars to the federal government every year and it's a fantastic policy making tool. So it cost taxpayers zero and it has proven it's worth at several critical moments in our history? No, it makes no sense to scrap it. Spend some time working on dismantling agricultural supply boards, leave CMHC in place, a few tweaks are fine but that is all.

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