The Office of the Superintendent of Financial Institutions downplayed the impact of the recent, far-reaching changes to federal mortgage rules when it testified in front of the Parliament Standing Committee on Finance last week, according to an industry observer.
In an analysis for CMT
, RateSpy.com founder Robert McLister wrote that the comments by OSFI Assistant Superintendent Carolyn Rogers did not provide a full picture of how the regulatory revisions are actually changing the Canadian residential real estate market.
“Rogers’ testimony omitted the true impact that OSFI’s capital changes are having in the marketplace, contained statements that could be interpreted as misleading, and failed to provide any substantive evidence justifying her agency’s changes,” McLister said. “This hearing will cast serious doubt on OSFI’s credibility and motives.”
With interest rates poised to climb because of the rule changes, McLister stated that Rogers did not sufficiently address the OSFI’s role in the mortgage increases. He noted that several mortgage finance companies have already reported drops of as much as 50 per cent in year-over-year volume.
“Pricing decisions belong to the lender. We (OSFI) don’t set prices. We set capital requirements. And if lenders and insurers choose to pass the capital requirements on to consumers in the form of higher prices, that’s a business decision and not a regulatory decision,” Rogers said in her testimony.
As a result of these developments, McLister argued that “[lenders] had no choice but to terminate products and jack up rates, thus harming consumer choice. OSFI and the Department of Finance knew this would result from their capital changes, or at least they should have.”
In addition, McLister stated that Rogers did not elaborate the extent of the damage that the new rules have inflicted upon industry competitiveness, “acknowledging only that the government’s rules are having a ‘disproportionate impact’ on bank challengers. Her testimony made little effort to elaborate on the serious “side effects”… Nor did she make an attempt to help parliamentarians grasp the extent of those repercussions on consumers and lenders.”
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