Government intervention has gone too far already, and the decision by the new Bank of Canada governor to keep the overnight rate unchanged is welcomed news
for a housing sector still reeling from “too much tweaking,” says one industry vet.
“We’ve gone a little too far in the re-tweaking,” says Bruce Hale, the principal broker at The Mortgage Centre Hale|Grifa & Associates. “Rates should stay the same. We’ve been weathering these regulation changes the past few years – four tweaks over four years. It’s been ‘overtweaked.’”
Bank of Canada Governor Stephen Poloz’s debut struck a chord of continuity last week, as he announced the overnight rate would remain at 1 per cent, carrying forward the “hands-off” policy of his predecessor Mark Carney
. However, Poloz did hint that the long-term goal for the economy is the “gradual normalization” of rates.
Most brokers wish Finance Minister Jim Flaherty
, who first intervened in the housing market by toughening the mortgage rules when the recession began to deepen in 2008, would adopt the same non-interference stance Poloz seems to have. In Hale’s view, Flaherty’s interventions to cool the housing market and avoid a U.S.-style housing collapse were really designed for only two markets – Vancouver and Toronto.
“They were way too Draconian,” Hale told MortgageBrokerNews.ca. “Now we have potential first-time buyers renting instead of buying. Ownership is better than non-ownership, better for the economy. These restrictions are creating a big problem for the future – especially when you consider 30 per cent of the economy is driven by the housing sector.”
The ticking bomb for Hale is the current state of affairs, and what may happen if interest rates begin to rise.
“It’s all uncharted territory right now,” he says. “Things will slow down even more with an increase in rates. I’ve been doing mortgages since the late 70s. I’ve seen rates when they peaked out in ‘81 at 22.75 per cent, and when property values dropped in the early 90s. These changes to the mortgage rules haven’t helped the ones who need the help – the legislation has just killed it.”