Dave Larock in Monday Interest Rate Update, Mortgages and Finance, Home Buying, Toronto Real Estate News Editor's Note: Dave's Monday Morning Interest Rate Update appears on Move Smartly weekly. Check back weekly for analysis that is always ahead of the pack.
This is an important week in the mortgage world because our federal banking regulator, the Office of the Superintendent of Financial Institutions (OSFI), is expected to release a draft of its B21 guidelines which will amend, and most likely tighten, the underwriting guidelines used by Canada’s big three high-ratio mortgage insurers.
There is concern within the real-estate industry that the four rounds of mortgage rule changes that have already been made have not yet had time to fully work their way into our real-estate markets. The fear is that more rule tightening in the meantime may turn the regulatory screws too tight, causing a sharp slowdown in housing activity that cannot easily be reversed.
Our policy makers would argue that our real-estate markets have held up well in the face of the first four rounds of changes and that ultra-low interest rates are still fuelling house-price increases, which will become unsustainable without further tightening. Raising interest rates to bring our largest real-estate markets off the boil would damage our broader economic momentum, whereas tightening our high-ratio mortgage rules provides a more targeted solution. If you’re going to conduct surgery on part of our economy, goes the thinking, better to use a scalpel instead of a chainsaw.