Flaherty says government intervention is done, others say differently
While many industry observers feel that the mortgage restrictions put in place by Finance Minister Jim Flaherty could lead to a crash in the Canadian real estate market, Flaherty feels that current figures are a positive sign, according to Financial Post.
"I'm comfortable about where we are," he told Julian Beltrame of the Canadian Press. "I'm pleased in particular that the condo market in big cities has fallen back. I'm also pleased with some other moderation in new house construction and in demand for mortgages. I think these are healthy developments because I think we were beginning to see some indications of the beginning of a bubble."
Flaherty went on to tell Beltrame that he has no further plans to intervene in the Canadian mortgage market because he doesn't need to, indicating that the previous restrictions put in place have done a satisfactory job.
It's easy to see why this news could lead mortgage professionals to breathe a sigh of relief. The last mortgage restrictions to be put in place, which included shortening the maximum amortization length on government-backed home loans from 30 years to 25 years, seemed to have a large impact on homebuyers when they went into effect during July 2012.
This also comes on the heels of rumors that The Office of the Superintendent of Financial Institutions Canada (OSFI) was considering limiting the amortization rate on uninsured mortgages to 25 years.
Is OSFI interference still on the table?
Despite what Flaherty told the news source regarding his intentions to stay away from the mortgage market, Canadian Mortgage Trends quotes Department of Finance spokesperson Stephanie Rubec as saying that Flaherty's remarks were in regards to insured mortgages.
It seems we are to infer that interference from the OSFI is still very much a possibility.
Regardless of all the talk surrounding amortization periods, one thing is certain: Mortgage rates continue to remain low, prompting savvy buyers to invest in homeownership despite attempts by the government to curb borrowing. Even with shorter amortization periods, the savings offered by low mortgage rates are enough to encourage many Canadians to take out home loans.
The low interest rates offered by Canadian lenders could explain the Bank of Montreal's recent Housing Confidence Report, which shows that nearly half of Canadian homeowners (48 percent) intend to purchase a property within the next five years. Meanwhile, Jim Murphy, president of the Canadian Association of Accredited Mortgage Professionals, reports that new homebuyers are turning to mortgage brokers to obtain even lower mortgage rates.