Bank of Canada advises prudence, practices mystique

Bank of Canada advises prudence, practices mystique

Anyone following Bank of Canada governor Mark Carney lately couldn't be blamed for being a bit confused, as the clarity of the Bank's message has left a lot to be desired.

For example, in the lead up to the latest rate announcement, and despite the Bank constantly reiterating that rates would stay at 0.25 per cent until June 2010, speculations were still around that Canada would follow Australia's lead and raise rates, which wasn't the case.

On Sunday, perhaps in an effort to dispel the uncertainty, Carney confirmed that rates would remain where they are well into the New Year. And although he wouldn't say so himself, this seems to be good news for those with variable rate mortgages right now.

"It's not my job to give investment advice to Canadians," he said.

Carney may not be in the business of advising people on their mortgages, but he certainly had a lot to say to Canadians, in general, who are looking at borrowing. In an article from the Globe and Mail called "Carney urges 'prudence' in housing market," he went on record saying that not only should lenders practice restraint in lending, but that potential homeowners should do the same.

"We remind people that borrowing is for the period you are going to borrow, not just for the moment you take out the loan," he said. 

That may sound like a veiled warning that rates could indeed go up in the near future, but when coupled with interviews like the one with CTV, as well as when he told Reuters that "2010 is still going to be a year where policy really matters," the picture is even less clear.

What are your thoughts?

  • Lachman Balani 2009-10-28 10:16:43 AM
    Carney has reiterated that rates will remain constant till inflation hits 2%. So be it. If rates rise now, CAD will rise further as people will move money to CAD due its higher returns. This higher dollar will hamstring the economy and is an inadvisable move right now when recovery seems to be on the horizon.
    If homeowning is to be discouraged(??) perhaps the banks should charge the posted rate instead of the discounted rate which would make them even filthier rich than they are already. But maybe the govt can tell them to take off the ATM and account service charges( to make them in lime with PC for instance) to offset the extra moolah they would make from giving mortgage loans at posted rates. Also raise VRMs from current prime minus X to a higher rate.
    A controlled study needs to be done first though.
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  • ted shackleton 2009-10-28 11:34:23 AM
    I think Carney should put a sock in it or audition
    for a spot on CNBC. enough said don't ya think.
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  • David Neville 2009-10-28 10:10:01 PM
    The economy will recover when consumers start spending again. And not just on small items, but big ticket items like housing. Mr. Carney is making cautionary comments, but all they are doing is making an already spend-fearing population even more fearful. According to CAAMP's Will Dunning, only 1/3 of the mortgages this year were for purchases. That should be more like 55% to 65% as purchases. We need more home sales in order to fully pull out of the recession, not less. Mr. Carney's comments are well intentioned, but now is not the time for them.
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