Canada stands ready to tighten mortgage rules: Flaherty

By Randall Palmer
STITTSVILLE, Ontario – The Canadian government, dealing with signs of an overheated property market, is ready to tighten mortgage insurance rules again if necessary, Finance Minister Jim Flaherty said on Thursday.
Mr. Flaherty also chided bank executives for asking the government to impose more restrictions, noting that the banks are the entities that offer mortgages.
Canada’s banking regulator, trying to curb risks posed by record-high levels of household debt, said this week it wanted lenders to be more transparent about their mortgage businesses.
Mr. Flaherty has imposed tougher requirements for government-backed mortgages three times since 2008.
“With respect to tightening up the mortgage insurance market we’ve done it three times … and we watch, we monitor the market, and if we have to tighten it some more we will,” he told reporters in Stittsville, Ontario.
“The new housing market produces a lot of jobs in Canada so there’s a balance that needs to be addressed. I’d like the market to correct itself, quite frankly, if it can.”
Mr. Flaherty said he had noted indications of softening in the Toronto condominium market, which he said was a good sign.
Canada’s household debt-to-income ratio hit a record high of 151.9% last year, largely the result of mortgage borrowing. The ratio dipped slightly in the fourth quarter but at 150.6% was not far off the record.
Mr. Flaherty said “it was a bit odd” that some banks were pressing him for tighter rules.
“We have bank executives in Canada saying ’You know, really the rules on insured mortgages should be tightened up’. They must forget that they are actually the ones that issue the mortgages — it’s their market, it’s not my market,” he said.
Since 2008, Mr. Flaherty has lowered the maximum amortization period for new mortgages to 30 years from 40 years, raised minimum down payments required to qualify for government insurance, and required all borrowers to qualify for a five-year fixed-rate mortgage to get insurance.
If he decided to act again, Mr. Flaherty could announce new measures in his March 29 budget.
Mr. Flaherty, who has promised to cut spending to eliminate the federal government’s budget deficit by the 2015-16 fiscal year, said he would be proposing moderate cutbacks in the budget.
“This is not an austerity program,” he said, adding the focus would be on long-term growth, prosperity, innovation and sustainable social programs.