Banks need to control their own lending and not rely on the government to do it for them. That’s essentially what Finance Minister Jim Flaherty told Bloomberg News last week.
“The primary responsibility for prudence in lending practices rests with the financial institutions,” he said. Just as importantly, individuals “need to take responsibility for what they do and exercise common sense in terms of taking on debt.”
It’s refreshing that sensibility is making headlines in Canada’s often emotional debt debate.
Banks are completely capable of underwriting prudently on their own. Moreover, banks by nature fear defaults. Mortgage defaults occur in plain view. They can’t be hidden and they are not tolerated in Canada’s highly scrutinized and regulated mortgage market
Flaherty won’t say whether any rule changes will be made in 2011, but he said he’ll carefully evaluate the economic implications. The most serious of these implications would be harmful effects on employment and job creation.
Some analysts are saying that it is better than a 50/50 chance that some kind of rule changes are coming. There’s major political pressure out there. At the least, this might prompt token rule changes if nothing else.
On the other hand, patience is prudence when tinkering with a $1 trillion mortgage market. International Monetary Fund (IMF) Canadian Analyst, Charles Kramer, says: “At this point, the appropriate thing to do is wait and see how the credit cycle matures.” But he says we need to keep ready to curtail mortgage lending “a bit more if it doesn’t decelerate.”
It’s important to remember that rising rates will crimp affordability. That in turn will self-moderate housing and borrowing, and this will all happen without any government intervention whatsoever. The concern is that adding new rules on top of a natural cyclical correction could cool housing too much.
“The primary responsibility for prudence in lending practices rests with the financial institutions,” he said. Just as importantly, individuals “need to take responsibility for what they do and exercise common sense in terms of taking on debt.”
It’s refreshing that sensibility is making headlines in Canada’s often emotional debt debate.
Banks are completely capable of underwriting prudently on their own. Moreover, banks by nature fear defaults. Mortgage defaults occur in plain view. They can’t be hidden and they are not tolerated in Canada’s highly scrutinized and regulated mortgage market
Flaherty won’t say whether any rule changes will be made in 2011, but he said he’ll carefully evaluate the economic implications. The most serious of these implications would be harmful effects on employment and job creation.
Some analysts are saying that it is better than a 50/50 chance that some kind of rule changes are coming. There’s major political pressure out there. At the least, this might prompt token rule changes if nothing else.
On the other hand, patience is prudence when tinkering with a $1 trillion mortgage market. International Monetary Fund (IMF) Canadian Analyst, Charles Kramer, says: “At this point, the appropriate thing to do is wait and see how the credit cycle matures.” But he says we need to keep ready to curtail mortgage lending “a bit more if it doesn’t decelerate.”
It’s important to remember that rising rates will crimp affordability. That in turn will self-moderate housing and borrowing, and this will all happen without any government intervention whatsoever. The concern is that adding new rules on top of a natural cyclical correction could cool housing too much.
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