No New Mortgage Rule Changes: Flaherty
There has already been “some softening” in the Canadian real estate market so there is no need for further tightening of mortgage rules, said Jim Flaherty, the finance minister.
Unlike the United States and Europe, the Canadian housing market has continued to rise after the financial crisis, leading some observers to caution we could be headed for a bubble.
Mr. Flaherty said he’s already intervened to toughen mortgage rules three times in the last few years and there’s no need for further action as conditions in the market are finally moving in the right direction.
In his first major public appearance since the election, at Bloomberg’s Canada Economic Summit in Toronto, Mr. Flaherty also said this country continues to weather the ongoing upheaval in the global economy. He said his number one priority is to deal with the budget — likely in June — in order to continue to implement his government’s economic action plan.
The past few months have seen the emergence of a string of new problems affecting the global economy, ranging from conflicts in the Middle East and North Africa and the rising issues around U.S. government debt.
Mr. Flaherty said the best way to protect Canada is for the government to move as quickly as possible to a balanced budget and to continue to take measures to strengthen the economy, such as maintaining low taxes for businesses and individuals.
Canada already has one of the lowest corporate tax rates of any major developed economy and the Conservatives have vowed to bring it lower still.
In the depths of the crisis Canada’s banks remained strong partly because of steps taken by the government aimed at boosting liquidity such as buying more than $70-billion of home loans from lenders. Ottawa also increased the limit on the volume of mortgages banks could sell into the Canada mortgage bond program.
Critics say that one unintended result was that banks were encouraged to make more home loans, which helped push up prices in the market.
But Mr. Flaherty said he does not believe there were unintended consequences from the government’s emergency support for the banks.
As a result of recent fluctuations in global currency markets the Canadian dollar is now trading at close to its highest level since 2008, creating challenges for many companies, especially manufacturers.
But Mr. Flaherty said the private sector is coping. One of the dangers of intervening, he suggested, is a fluctuating currency, which would be even more problematic.
“What we want to avoid is sudden, jerky movements in the Canadian dollar,” he said.
Mr. Flaherty said his government will present a slightly revamped budget in June. It will be changed to reflect an economic update and may include some items from the election platform, but will be largely the same budget he presented in March, Mr. Flaherty said.