Quote:
Originally Posted by photon
The banks are certainly not loosening anything in my recent experience, they're asking for more than they ever have.
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On Tuesday Bloomberg released documents obtained through freedom of information requests that showed the Office of the Superintendent of Financial Institutions has some fears that loosening mortgage standards poses an "emerging risk" to Canada's economy.
In the 152 pages of documents, internal communications reveal that OSFI - the regulator in charge of all federally monitored financial instutuions in Canada - worries banks are becomming "increasingly liberal" by handing out loans without requiring borrowers to prove they have sufficient incomes to pay them back. Such loans have similarities to non-prime loans in the U.S. retail lending market," the OSFI documents reveal.
Speaking to reporters in Tel Aviv, on Thursday Jim Flaherty echoed the OSFI's concerns. OSFI's concerns stem from a fear that Canadians might be getting mortgages that they won't be able to afford, when rates go up from their current lows. That in turn would hurt the greater economy and Ottawas coffers as the taxpayers are ultimately responsible for funding any CMHC payouts for mortgages that default.
I guess it is not an immediate issue though as the Canadian employment report today was weaker than expected with a paltry 2,300 gain last month, while the unemployment rate ticked higher to 7.6%, leaving the Bank of Canada in no position to raise rates any time soon.