The recent revisions to federal mortgage rules announced by Finance Minister Bill Morneau weeks ago are exactly what the Canadian economy needs to maintain its stability, according to the former president/CEO of TD Bank.
Ed Clark noted that while the measures—intended to moderate overheated housing markets—were a bit overdue, they are necessary as the vitality of Canadian real estate should be treated with utmost importance, BNN
“Four or five years ago, I proposed the very measures, which the federal government has now done, and I think we should have done those measures sooner, but it’s good that we’ve done them now,” Clark said.
The changes introduced include a new risk-sharing model for major banks, “stress tests” for borrowers taking on insured mortgages, and the closing up of tax loopholes for capital gains exemptions on principal residence sales.
Clark argued that these steps will buttress the Canadian economy against the worst effects of slow global growth and the resultant record-low interest rates.
“The best thing you can do is start to lean against it, like these policies, so that you don’t have an asset bubble get so big that it bursts, because when it bursts, that’s when you have a really bad situation,” he said.
“It’s very hard to fine-tune exactly how you lean against it, but I think we should be leaning against it; if we don’t lean against it, we’re going to create a bigger and bigger asset bubble that will create problems in the future.”
Latest regulatory changes will support the Canadian economy—CMHC head
New rules will pave the way for a less anxious BoC—analysts