In light of the talks about further mortgage rule changes, I cannot help but tip my hat to Jim Flaherty’s comments about the lenders who chirped about wanting the government to step in and “change the rules for them”. Below is an excerpt from the Financial Post….and I think it’s worth the read. (As for the banks that think it’s a good idea for the government to tighten mortgage rules further, IE: change the amortization period down to maximum 25 years…. I think it’s a good question: why don’t you do that with your bank?)
http://business.financialpost.com/2012/03/22/canada-stands-ready-to-tighten-mortgage-rules-flaherty/
OTTAWA — Finance Minister Jim Flaherty saw irony Thursday in major banks seeking changes to mortgage rules from government, given the control the banks themselves have over the industry.
Flaherty said, however, the possibility of tightening the insured mortgage market — which has been done three times under the current Conservative government — is there. Those decisions, however, result from constant evaluation of the markets.
“I find it a bit odd that some of the bank executives are taking the position that the minister of finance or the government somehow should tell them how to run their business,” Flaherty said during an appearance in Stittsville, Ont., just west of Ottawa.
“We have bank executives in Canada going and saying ‘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. They decide what they want to charge in interest rates.
“They’re the ones that make the profits out of this business, so I do find it a bit much when some of the bank executives turn to the government … and say ‘you ought to change the rules and make it tighter.’ It’s very interesting commentary from them.”
Ideally, the finance minister said, the mortgage market will be able to work out its own issues, for which he said he’s already seen positive signs.
“There’s a balance there. The new-housing market produces a lot of jobs in Canada, so there’s a balance that needs to be addressed,” he said. “I’d like the market to correct itself if it can. We’re seeing some evidence of that in the condo market, particularly in Toronto, where there is some softening of the market and that’s a good thing.”
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.
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.
“We will have modest savings-reductions in order to stay on track to a balanced budget in the medium term,” Flaherty said. “More importantly — and this really is the focus of the budget — if you concentrate on the savings, you’re going to miss most of what the budget is about. (It’s) about long-term sustainability for jobs, growth and prosperity, looking at retirement income, making sure our social programs are sustainable in the long-term for Canada.
“We’re coming back down in our deficits — you’ll see the numbers next Thursday. We’ve done very well this year, we’ll do better next year. We keep reducing the deficit and we’ll get to balance in the medium term.”
Flaherty also defended the government’s Economic Action Plan by referring to a number of infrastructure projects across the country, as well as numerous tax credits, including child fitness credits and those linked to volunteer firefighters.
He said that initiative has help keep unemployment down across the country as well, saying that despite the economic downturn, Canada’s unemployment “never went into double digits.”
Flaherty was particularly critical about provincial spending in Ontario and said change is needed in that province to put it in a better fiscal situation.
“What we’ve basically seen in Ontario is eight, almost nine years of spending mismanagement,” he said. “They need to focus in Ontario, and for the good of the country … on the spending side of the ledger and get things under control. What we’ve seen so far from Ontario — and this is disappointing, but not surprising — is this ‘we’re in a lot of trouble … so we’re going to blame Alberta and other Canadian provinces.’
“Next week I suspect they’ll blame … the federal government, despite the fact our transfers to Ontario are up 77 per cent since we took government in 2006. This year, we’ll transfer $19.2 billion to the government of Ontario, so I forewarn you about that, that we’ll see this ‘blame everyone else, and don’t look in the mirror’ (attitude).”
With files from Reuters
