Poloz hints at future policy

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Brokers can breathe a sigh of relief, following Stephen Poloz’s latest comments on what role the central bank should play in setting economic policy.

“The Bank of Canada’s view is that monetary policy should be the last line of defence against threats to financial stability, behind the joint responsibility of borrowers and lenders, appropriate regulatory oversight within the financial sector, and sound macroprudential policies,” Governor of the Bank of Canada Stephen Poloz said during a speech in Washington at the National Association for Business Economics over the weekend.

That less-is-more stance will be welcomed by brokers, many of whom struggled following aggressive mortgage tightening by the government over the last few years.

Those, of course, included lowering amortization periods, lowering loan-to-value maximums, and limiting the maximum gross debt service ratio.

Poloz also said it isn’t the role of monetary policy to protect individuals from making bad choices. Still, he acknowledged macroprudential policies, especially in the housing sector, have been effective.

“The International Monetary Fund and several central banks—including the Bank of Canada—have … found that some macroprudential policies, such as limits on mortgage loan-to-value ratios and increased capital weight on bank holdings of mortgages—can moderate the growth of credit and house prices as well as improve the average creditworthiness of borrowers,” Poloz said. “The impact of recent macroprudential tightening in Canada, which was aimed primarily at rules for insured mortgages, appears to support these findings.”
  • Michael Mitchell on 2015-10-14 9:35:24 AM

    Mortgages are not the problem,Banks issue lines of credit and credit cards knowing full well they will put people over the imposed TDS/GDS rules.

  • Matt on 2015-10-14 9:53:04 AM

    Yeah... only banks issue debt over client capacity. Not broker of course...Give your head a shake.

  • Debbie on 2015-10-14 10:22:43 AM

    Matt...Brokers don't issue any other debt. Only mortgages. Very few avenues offer a broker the opportunity to sell unsecured LOC or credit cards, and usually only sold to establish credit, not increase the debt service. We are not in the business of up-selling products like the banks are. I've been on both sides of the street and I know banks want you to sell a full suite of products. Most reps are only looking at what they can sell, not thinking that the products they just sold the client may well ruin the chance of qualifying for a mortgage.

  • Layth Matthews on 2015-10-14 11:12:20 AM

    It's a mixed economy question. Does accomodative monetary policy undermine the renewal of the economy and redistribution of wealth through the force of creative destruction? Or does it stem the extremes of destructive destruction through deflation? I mean, how can the meek inherit the earth if the reckless and greedy keep getting second chances? On the other hand, a job is a good thing, even if the rich keep getting richer for a while longer.

  • steve on 2015-10-14 11:43:37 AM

    0 payment for 12 months, adding debt to a car loan beyond the value of the car, 25 yr amortization on RVs where the RV will be worn out in 15, high interest credit cards, payday loans, gambling are more dangerous than mortgage debt, but, government doesn't care.
    If government wants to allow these, then they should at least demand high risk credit pay a tax premium into a bankruptcy fund to help the people they overload with debt.
    When rents are higher than mortgages, whats the real problem? Lack of housing or loose mortgage rules?

  • Dustan Woodhouse on 2015-10-14 12:37:10 PM

    Have a look at a credit card statement with a 5 figure balance on it, the effective amortization is measured in centuries, not decades.

    How is that acceptable.

    in any event Mr. Poloz hits that nail on the head when he says consumer debt is not his issue - it is a self made issue of the consumer.

    Consumers, Canadians, need to take some responsibility for their own personal actions.

  • Rob on 2015-10-14 1:39:48 PM

    @Mitchell by why do people take them? I don't!

  • Bert on 2015-10-14 4:24:31 PM

    to Matt at 9:53 am. Broker's don't issue debt, lenders do. That'd be banks etc... before you start advising brokers to "give their heads a shake" perhaps you may want to ask your manager a few questions on how this lending thingy works...

  • kac on 2015-10-15 1:33:32 PM

    knee jerk reaction by Poloz,i guess the government has no accountability as to how Canadians drown in credit card and line of credit debt only in mortgage debt which doesn't seem to be as much of an issue,i seem to have a very difficult time having a client approved for a mortgage with a 30% down payment due to debt servicing issues which finally at the 12th hour is approved and on the 13th hour the client is offered $25k in a line of credit going out the door? i find it interesting how if the client had a hard time debt servicing a 70% ltv mortgage at 2.69% how the lender manged to debt service a 3% payment on $25,000 going out the door. Oh right,the client now is dead locked into that institution every other lender now will debt service that debt except of course the lender that gave it to them in the first place.

  • Michael Mitchell on 2015-10-18 2:52:04 PM

    Kac I willing to bet that lender was TD Canada Trust

  • kac on 2015-10-19 1:03:10 PM

    @Michael-actually Scotia

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