Canada’s banking regulator is still monitoring 30-year mortgages, the head of Canada’s financial regulator told a conference of mortgage brokers in Toronto on Monday.
In recent years there has been a shift in the marketplace, with lenders offering more 30-year amortizations, and that’s something that the regulator is studying, Julie Dickson, the head of the Office of the Superintendent of Financial Institutions said.
“We are getting more information and talking to institutions about that,” she said.
While Finance Minister Jim Flaherty changed the mortgage insurance rules in July of 2012 to cut the maximum amortization of insured mortgages to 25 years, uninsured 30-year mortgages are still available for consumers who have a downpayment of at least 20 per cent.
Roughly half of all new uninsured mortgages now have 30-year amortizations, Ms. Dickson said.
“This is a market that continues to bear very close watching,” Ms. Dickson told the conference during a speech, referring to the country’s housing market broadly. “We continue to closely monitor real estate lending.”
She noted that the regulator considered tightening the mortgage-lending rules that banks must follow, known as “guideline B20,” this spring and decided not to make any changes at that time.
“Prudent lending practices should not change over time,” she said during her speech.
“It’s a dynamic mortgage market, so we’re constantly monitoring and getting a lot of information still,” Ms. Dickson told reporters afterwards. “We’re still analyzing and I expect that we’ll continue to do this for a long time, but we need to be ready to act if we feel we need to act.”
Ms. Dickson said the regulator will not weigh in on whether or not a bubble has formed in Canada’s housing market, because to do so could encourage banks to lend more or create an unnecessary slowdown.
“The continued strength of housing prices across many Canadian cities in the second half of 2013 is undeniable,” she said.
“Some might suggest that all is well in the mortgage market because delinquencies are low and credit score of borrowers are high,” she said. “However, delinquency rates and credit scores are lagging indicators that can deteriorate rapidly if economic conditions worsen. So OSFI encourages financial institutions to pay considerable attention to the quality of borrowers, both in the current environment and potential future environments.”
That being said, Ms. Dickson did point out some ways in which Canada’s mortgage lending is more prudent than in some other countries.