Flaherty Said to Tighten Canadian Mortgage Rules (Update1)

http://www.fxfxfx.com 2010-02-16 12:46:37

euro usd GBP USD dollar exchange rate 欧元汇率

Canada’s Finance Minister Jim Flaherty will announce changes tomorrow to tighten rules in the country’s mortgage industry, according to two government officials familiar with the plan.

Canadian home prices and resales will grow to records this year, boosted by low interest rates, the Canadian Real Estate Association said in a report last week. Canadian new-home prices rose 0.4 percent in December from November, the sixth straight gain, according to government figures.

Flaherty is slated to talk to reporters in Ottawa tomorrow at 8 a.m. New York time. Stephen Jarislowsky, chairman of Montreal-based investment adviser Jarislowsky Fraser Ltd., said last week he’s “convinced” there’s a bubble in Canada’s housing market, fueled by government measures that encouraged consumers to take on debt.

The Department of Finance in 2008 said Canada Mortgage and Housing Corp. would limit amortizations to 35 years and offer loan insurance on only 95 percent of the loan value. The government’s housing agency had offered mortgage insurance on loans worth as much as 100 percent of the home value and amortization periods of as many as 40 years since 2006.

“They have basically encouraged people to buy houses based on cheap mortgages,” Jarislowsky, 84, said in a telephone interview from Montreal. “That has created the opposite effect of what was desirable.”

Amortization Limits

Flaherty may implement a debt-affordability test for homeowners seeking a government-insured mortgage, according to the Canadian Press. The government may also reduce the amortization limit for government-insured mortgages to 30 years, the Canadian Press reported, without saying how it obtained the information.

Canada’s average five-year mortgage rate was 5.39 percent on Feb. 10. In May, it was 5.25 percent, the lowest since 1951, according to Bank of Canada figures. Bank of Canada Governor Mark Carney has pledged to keep his main interest rate at a record low 0.25 percent through June unless the inflation outlook shifts.

Bank of Canada Adviser David Wolf said in a January speech that it’s “premature” to conclude there’s a bubble in the housing market, and a rate increase to slow it would “be dousing the entire Canadian economy with cold water, just as it emerges from recession.”

Flaherty’s spokesman Chisholm Pothier said last week the government has policy tools available to counter any negative “trends” in the housing market if needed. He didn’t elaborate.

The booming housing market partly reflects the strength of Canada’s financial system, which was named the soundest in the world for two consecutive years by the Geneva-based World Economic Forum.

[Print] [Close]

Keywords：Canada percent said Canadian