Finance Minister discusses potential measures

Finance Minister discusses potential measures

Finance Minister discusses potential measures Finance Minister Joe Oliver, who is currently in meetings with his provincial finance minister counterparts, has said the government may take steps to rein in an overvalued housing market.

“In terms of household debt and the real-estate market, this is a subject, of course, we’re monitoring very carefully,” Oliver said, according to the Canadian Press. “So, we’re not going to take any dramatic steps in that regard, but we may take some moderate steps.”

Oliver, who took over for the late Jim Flaherty in March of this year, has said from the outset that monitoring the housing market will be a priority.

"Our government has taken action in the past to reduce consumer indebtedness and the government's exposure to the housing market," Oliver told CTV News on in late March. "I will continue to monitor the market closely."

The Finance Minister remains mum about what measures would be considered.

“Our longer-term objective is to reduce the government’s exposure to the mortgage market and we keep that objective in mind going forward,” he told CP.

The Bank of Canada recently took a stance on the state of housing prices, saying it believes the Canadian housing market is 10-30 per cent overvalued. However, the Governor of the Bank of Canada, Stephen Poloz, has also said he does not fear a housing crash.

“The risk comes when some catalyst sets off the vulnerability,” Poloz said on Thursday. “In this case it would be, let’s say, a rise in unemployment, a significant one, where it makes people have difficulty paying for their mortgage, or a rapid rise in mortgage rates, neither of which we’re expecting.” 
  • kac 2014-12-15 12:30:52 PM
    the comments of reducing the govenments exposure to the housing market is right on the nose,as for the action of reducing consumer debts i just don't see it. It may be next to impossible for the average Canadian to obtain a mortgage or buy a house but it sure hasn't gotten any tougher to obtain a high rate credit card,loan through a finance company or unsecured line of credit. Im sure the finance minister must see some sense to making it next to impossible to get into the most secured of all debt and still be relatively easy to get auto loans that carry $1000 payments. Im sure the economy will flourish with tat mentality.
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  • Ron Price/DLC 2014-12-15 12:53:30 PM
    Well said Kac,
    Let's hold our collective breath and keep all fingers crossed he doesn't lower the LTV further for refinances b/c it's already down to the conventional level nor increase the minimum down payment (irrelevant) b/c as you said secured mortgages are not the problem (exclusive of secured LOC's of course), it's unsecured consumer debt, which he does not have the will to do anything about (a la banks back pocket). Feels like we are preggy (expectant)
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  • Layth Matthews 2014-12-15 1:02:25 PM
    The housing market is always 10-30% over or undervalued, just based on the geo-economic diversity of this country.

    A rapid increase in unemployment would be followed by a rapid decrease in the prime rate. Fixed rates would tend to be softer too, unless we had...

    A rapid rise in fixed mortgage rates driven by US economic strength. But a strong US economy would tend to strengthen Canadian employment and wages over the 2.5 year average period in which fixed rate mortgagors would be adjusting.

    The only scary scenario is the one we just had in 2008 (seems like yesterday!) where the economy stalls and yet rates spike temporarily, driven by risk aversion. And then the government exacerbates the the situation with 4 years of austerity measures - e.g.restricting the availability of VRMs at their most helpful time in history. (Mind you it does create an incentive to keep your ratios down, so you can qualify!)

    Long before setting policy, the government should commission research, to tease out the the relative well-being associated with lower GDS/TDS ratios. Keep talking about the results.

    The current ratios we have are good for qualification purposes, but they amount to bondage to the financial sector for anyone but investors.

    If people don't see the sense in it themselves, there is no lasting benefit in restrictive policy. The next government will just change it. The best case scenario is liberal policy with a sophisticated population. Then households will have the ability to reposition themselves (with the help of a good mortgage broker), whatever storms may come.
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