The writer is a Vancouver mortgage broker.
Carney commented on the extreme valuations in a few Canadian markets…tough words for a Bank of Canada Governor.
Vancouver is over 11 times income for average house prices in Vancouver. The historical average has been 3 times income. Clearly the Vancouver market has become unaffordable to all, with the exception of the buyers of houses in this super hot market.
The impact of Mark Carney’s sharp comments concerning the Vancouver mortgage will be minimal.
The flood of money from China will continue unabated. The Chinese investors are looking for a safe haven as China begins to tightened its monetary policy.
Carney is restricted by the flaccid job growth in Canada and the US. An increase in interest rates will push the dollar higher. A higher dollar will have a dampening effect on Canada’s already weakened export sector further weakening the soft jobs recovery.
There is a clear recognition that some markets in Canada have become overvalued. Interest rate intervention is not the way the government will attack this problem.
The Finance Minister has submitted an amendment to Reinforce the stability of Canada’s housing finance system.
- Strengthening the Government’s oversight of the mortgage insurance industry.
The impact of tightening the mortgage lending rules will have a dampening effect on the mortgage lending market. What the potential rule changes to be implemented are is still in question. The only certainty is some Canadian’s applications will no longer be considered.
In summary, rates will remain at historically low levels until the job recovery is certain; however the rules governing mortgage insurance will undoubtedly get tougher.
