BC Business
Why does Canada's "well-regulated housing sector" have Tony rolling his eyes?
Canada's new mortgage rules display good fiscal management – but it's time the federal government stopped bragging about it. In the wake of increasing bad news on the housing front down South, the Canadian government has once again made “prudent” changes to the Canadian mortgage system. And judging by the self-serving language used in their announcement of the system, can an election be far behind? The new mortgage rules in Canada
Why does Canada’s “well-regulated housing sector” have Tony rolling his eyes?
In the wake of increasing bad news on the housing front down South, the Canadian government has once again made “prudent” changes to the Canadian mortgage system.
And judging by the self-serving language used in their announcement of the system, can an election be far behind?
The feds reduced the maximum amortization on insured mortgages (i.e. those with down payments of less than 20%). They also imposed an 85% Loan to Value limit on insured refinances. And lastly, they eliminated government insurance on secured lines of credit.
This comes after news that the decline in U.S. house prices has edged past levels of the Great Depression. For 53 consecutive months, house prices have declined as the inevitable retraction from the orgy of borrowing and refinancing of the first half of the 2000s works its way through the system.
The U.S. government has thrown money at the housing system in an effort to buoy it up, but it hasn’t had much impact so far. U.S. homeowners are too deep in debt and are abandoning their homes rather than buy new ones.
Here in Canada, it’s a different story. The Canadian housing market actually helped Canada escape most of the horrors of this recession.
Of course the government is taking credit for this in a big way. Just listen to this press release line – and it’s not even in quotes (emphasis mine):
Our Government’s ongoing monitoring and sound underlying supervisory regime, along with the traditionally cautious approach taken by Canadian financial institutions to mortgage lending, have allowed Canada to maintain strong and secure housing and mortgage markets.
Gag. But it gets worse when government ministers open their mouths. For example, this from Finance Minister Jim Flaherty (again, emphasis mine):
“Canada’s well-regulated housing sector has been an important strength that allowed us to avoid the mistakes of other countries and helped protect us from the worst of the recent global recession. The prudent measures announced today build on that advantage by encouraging hard-working Canadian families to save by investing in their homes and future.”
Okay, traditional Canadian conservatism did help us avoid the excesses of home buyers in the U.S. And yes, our system was far more regulated (which wasn’t always appreciated, by the way).
And, of course, the government did inject some prudence into the market. But most of us were smart enough to know that leveraging a home loan to 150 per cent was pretty stupid.
Essentially, this government’s message has continuously been, Daddy is taking care care of you. We’re way smarter than those yahoos down South.
All this chest thumping tells me this government is desperate for an issue to use for an election call. Economic prudence is always a good one.