Business

Winnipeg Free Press - PRINT EDITION

Canadians starting to get it: Flaherty

Mortgage rates will rise eventually

By: Gustavo Vieira

Posted: 09/1/2012 1:00 AM | Comments: 0

TORONTO -- Finance Minister Jim Flaherty says he's still concerned about the mortgage debt Canadians are carrying, but adds he thinks they're getting the message interest rates won't stay low forever.

"I remain concerned about people taking on larger obligations than they would be able to afford were interest rates to go up, as they inevitably will," Flaherty said.

"But other things are going on too. I think Canadians are increasingly getting the message that at some point interest rates are likely to rise."

Canadians, Flaherty added, are "starting to understand the risk there and that it's prudent not to overextend oneself."

That message has been an oft-repeated one, from Flaherty and Bank of Canada governor Mark Carney.

In June, Flaherty took action on Carney's worries about Canada's hot housing market and high household debt by tightening mortgage and borrowing rules yet again.

While Flaherty said it's too early to gauge the effect the new rules are having on the real-estate market, he welcomed indications of a recent cooling in the condo market, particularly in Vancouver and Toronto.

"That's desirable," said Flaherty.

"It's better to have some softening in the market rather than have sudden movements."

Following even larger drops for June, the Real Estate Board of Greater Vancouver reported sales of previously owned properties dropped 18.4 per cent in July from a year earlier, while the Toronto board said sales had slipped 1.5 per cent during the same period, with condo sales falling 10 per cent.

Economists have warned Canada's housing market is too hot, particularly the condo markets in cities like Vancouver and Toronto.

The new mortgage rules entered in force on July 9.

Among other changes, the government reduced the maximum amortization terms for mortgages backed by the Canadian Mortgage and Housing Corp. from 30 to 25 years, and limited CMHC-insured mortgages to homes of up to $1 million. CMHC insurance is warranted for deals in which buyers put less than 20 per cent down payment on a home.

Speaking Friday at a press conference on Canada's economic performance in the second quarter, Flaherty didn't signal any further moves to tighten lending rules.

The minister twice referred to the possibility of the Bank of Canada rising interest rates in the future, but didn't make any predictions as to when the hike would come.

The move is a two-edged sword because raising interest rates could lead to dampening other economic sectors.

-- The Canadian Press

Republished from the Winnipeg Free Press print edition September 1, 2012 B5

Fact Check

Have you found an error, or know of something we’ve missed in one of our stories? Please use the form below and let us know.

* Required

In which story did you find the error? *
Please post the headline of the story or the title of the video with the error.
What was the error? *
Please post exactly what was wrong with the story.
What should we have written?
Please indicate your source for the correct information.
Who else should we interview to improve this story?
Please include any contact information you may have.
Can we contact you in the future for advice on stories about this topic?
Yes

No
First Name: *
Last Name: *
E–mail Address: *
This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.
Phone: *
This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.
Colour:
Are you blue? If you can see this, leave it blank and get some CSS support.
Enter the words that you see: * This is to prevent our forms from being filled out automatically.
You have failed to correctly identify the words in the box above. Please try again.

More Business

Undock

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

Have Your Say

Comments are open to Winnipeg Free Press print or e-edition subscribers only. why?

Have Your Say

Comments are open to Winnipeg Free Press Subscribers only. why?

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.