Poloz: We have a competitive mortgage market

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The Governor of the Bank of Canada, Stephen Poloz, appeared on BNN’s Headline with Howard Green on Wednesday and proclaimed the Canadian Mortgage market is healthy.

“We have a competitive mortgage market and that is good for you and me; three-year and five-year rates could go up more as the fed continues its tapering and people will see that when they renew but mostly what we see is today people are renewing at a much lower rate than they did last time,” Poloz said. “That’s not a worry; that just means that people have the spending power to continue to operate their household spending … so it’s not like it’s constraining yet.”

In the 30-minute segment Green parsed the BoC’s Monetary Policy Report from earlier in the day, focusing a great deal on the housing industry. Poloz, who was accused of being “dovish” in his comments about the state of the economy, admitted his main concern for the Canadian housing market is foreign investors pulling their money out of the market.

“This is why we highlight housing as a risk to us, it’s not because we think it will cave in by itself or something like that; some other shock could leave people exposed to, perhaps, a decline in prices or a more rapid rise in interest rates than anybody is expecting,” Poloz said. “That kind of thing could give rise to a disruption to demand – core demand from the consumer – in Canada and the significant downward risk on inflation and that’s our main concern.”

The governor does, however, believe the housing market is stable due to normal levels of growth that are in demand with demographic trends.

“What we do look at is a macro picture which shows that houses are being built very much in line with our demographic fundamentals,” Poloz said. “In fact a little bit less in the past year and the resale activity is about in line with normal churn in the market.”

Concerning interest rates, Poloz admitted the door has happened for a potential rate cut, as the Bank of Canada is less sure of itself, following disappointing exports investment and inflation.

“We pick two per cent for a reason; it’s a buffer, it gives us room to maneuver when there are bad shocks, it gives us room to cut interest rates if we need to,” Poloz stated. “And right now inflation is too low to give us that kind of buffer and if you had some sort of bad shock over the next year or two it would be a much harder situation to manage than we had back in 2009/2010.”

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