Finance Minister Jim Flaherty is defending his recent interventions into the Canadian mortgage industry, insisting he is acting out of concern for consumers.
Manulife Bank reversed a mortgage-rate cut this week after Mr. Flaherty instructed his staff to inform the lender that Ottawa considered its actions to be “unacceptable.”
The intervention – Mr. Flaherty’s second in recent weeks after previously scolding BMO for offering a similar rate – has prompted criticism on Bay Street and Parliament Hill.
“Our concern, my concern, for a number of years with very low interest rates is to ensure that people can afford their mortgages when interest rates go up,” said Mr. Flaherty Wednesday in Toronto, where he toured a Roots factory and tried on a new pair of shoes as part of a long-standing pre-budget tradition.
“That’s the concern. It’s a concern for the Canadian people that they’re careful and that they don’t assume that very low interest rates like we have now will continue indefinitely, because they won’t. Inevitably, interest rates will go up, so that’s the concern,” he said.
The event was a photo-op rather than a news conference and Mr. Flaherty did not answer further questions on the topic.
NDP leader Thomas Mulcair said Mr. Flaherty’s interventions are inappropriate.
“It’s banana republic behaviour,” Mr. Mulcair said Tuesday. “We live in a society based on the rule of law. Parliament enacts laws, the administration can have regulations, you can have orders in council, but since when do you use political weight to push back on financial institutions responding to a market parameter that’s totally legal?”
Liberal MP Ralph Goodale, who was federal finance minister from Dec. 2003 to Feb. 2006, said Mr. Flaherty’s “dubious” actions raise a lot of serious policy questions.
Mr. Goodale said in his experience, interactions with banks were largely handled by the department’s deputy minister or other public servants, not the minister or political staff. He said Mr. Flaherty should meet with all the heads of banks as a group if he’s concerned about mortgage rates, rather than dealing with banks one at a time.
“Are we now into a situation where the minister is regulating retail rates?” he asked. “Well, that’s a pretty fundamental change in the way our financial institutions have operated.”
As well, Conservative Small Business Minister Maxime Bernier also told reporters Wednesday that he wouldn’t have done it.
“Me, personally, I would not dictate to businesses what prices to decide,” he says.
“It’s the market. It’s supply and demand that decides the prices. It is the case for interest rates, it is the case for other products too.”
with a report from The Canadian Press