Mortgage brokers worried Ottawa is moving to axe the 30-year amortization, rest easy … well, sort of.
There are no plans in the works to reduce the maximum amortization on CMHC-insured mortgages to 25, Minister Jim Flaherty told reporters Tuesday, on the heels of the central bank’s decision to hold its overnight rate steady, effectively doing nothing put the brakes on growing consumer debt.
Flaherty said he does not believe Canada's housing market is a bubble, with the possible exception of two hot spots — the condo market in Vancouver and Toronto. But, he said he is monitoring the situation.
"We watch the housing market carefully and we are prepared to intervene if necessary,” he said. “Having said that, we're not about to intervene now."
The comments are likely welcomed news for brokers concerned the government would move to tighten mortgage rules for the fourth time in as many years in order to slow down escalating consumer debt levels.
The Bank of Canada decision Tuesday, mandated by the threat of recession and the need to further stimulate the economy, is likely to encourage further growth, said Governor Mark Carney in explaining the move, or the absence of a move.
“Household expenditures are expected to remain high relative to GDP (gross domestic product) and the ratio of household debt to income is projected to rise further," said the central bank in announcing it would hold the key rate steady for the eleventh consecutive review. It hasn’t, in fact, been moved since September 2010.
The central bank's decision on interest rates jives with industry expectations in the build-up to the announcement.
It also gives brokers continuing elbow room to grow originations despite a slowing real estate market, although fixed rates – increasingly the focus of clients – aren’t directly affected by the overnight rate.
While the government isn’t now prepared to step in with mortgage rule changes, brokers have suggested it may want look at amending rules around the regulation of lenders offering unsecured credit such as credit cards and lines of credit as a more effective way of protecting the financial fitness of Canadian households.
“It is time for the government to look at consumer borrowing in areas other than mortgages, said one Ontario broker responding to a recent MortgageBrokerNews.ca story on possible changes. “We don't have a mortgage problem in Canada, we have a consumer debt load problem. There is no debt retirement programs being built into consumer credit and that is where consumers are getting into trouble.”