BMO CEO: House prices bound to come down

Bank of Montreal Chief Executive Officer Bill Downe is saying there are ‘legitimate’ concerns about house prices being over inflated and coming down, particularly in Toronto and Vancouver.  He is now calling for the fabled ‘soft landing’ to swoop in and fix the problem:

“We took a long, hard look at the Canadian housing market and concluded … there was a legitimate concern that house prices – particularly in the largest cities – had been rising at a rate that was simply unsustainable,” Mr. Downe said.

“With growing concerns over household debt, a soft landing in housing is in the best interests of our customers and the national economy.”

For those that are curious, yes this is the same BMO that kicked off a rate war with competitors over a special 2.99% mortgage deal. If you’re wondering why a bank would offer credit crack and then tell the addict they should cut back I think Patriotz puts it very clearly:

Because he runs a business and it’s his responsibility to the shareholders to make money. It’s either lend at 2.9% or give the mortgage business to someone else.

Banks like every other business have a responsibility to obey the law and that’s what they are doing. If you don’t like the parameters that the government has established, blame them not the banks.

This is why you’ve been hearing more call from the banks for the government to tighten lending standards.  No single bank can cut out a huge percentage of the market just because they’re concerned about over-debt households.  The banks can’t even get together and agree that they’ll adjust their lending standards themselves, because that would be collusion and illegal.

It’s all up to Flaherty now.

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fixie guy

80 vangrl Says:“Won’t the banks just use private insurers making this a nonevent?”

If private insurers were willing to touch this market segment with a ten foot pole the CMHC wouldn’t be here. That private insurers won’t is why it’s backed by taxpayer dollars. The brilliant aspect is it’s the party of business who thought themselves smarter than the market and took full advantage of an otherwise unwanted monopoly.

Of course, Guy Smiley’s posts reveal another reason, one not coincidentally identical to the situation in the US. Financial industry insiders rotated through regulatory positions as part of an insane ‘experts overseeing experts’ initiative. It’s our era’s greatest grift.


@N: Righto. PMIs are under no obligation to insure anything they deem unprofitable. Is AIC insuring Kelowna area mortgages?

[…] -It’s looking like a day for a 16k party -RE/Max: Housing off to a strong start -Who’s in charge of regulation? -Expect no housing moves in budget -CMHC to dramatically curtail growth -Risks of CMHC mortgage cover -What now Mr. Flaherty? -Affordable housing, why bother? -10 story wooden condo tower -UBC housing action plan (VIDEO) -People don’t like a driving tax -No springtime for chinese property market – […]


@N: “Unlike the CMHC, which has no reason to care whether it gets burned, private insurers will not insure dumb-ass loans”

Ever heard of AIC?



Unlike the CMHC, which has no reason to care whether it gets burned, private insurers will not insure dumb-ass loans that they are likely to loos money on, which is to say almost all FTB loans in Vancouver these days. Before a private insurer insures a loan, they are going to want to be pretty sure that the folks taking it on can actually pay, and they are going to want to be fairly confident that the house will not be underwater any time soon.




Missed the train

UBC is building crazy but perhaps too little too late. Are we arriving to over condo supply over there now ?


“CMHC insurance is good for the duration of the mortgage.”

oh ya right:)

another question:

Won’t the banks just use private insurers making this a nonevent?



CMHC insurance is good for the duration of the mortgage.


very nice. It seems like I front-run that G&M article by a couple hours (at post #30) in terms of discussing the CMHC’s planned significant “rationing”.

If Flaherty’s “do nothing” rhetoric includes “doing nothing to increase the CMHC cap”, it’ll make things very very interesting.


this commenter on the G&M article makes a good/crazy/scary point

“This issue is serious and reminds of exactly what happened in the USA in 2008
How’s will an overstretched mortgage holder renew their mortgage at higher rates and with no affordable mortgage insurance in 3-4 years?”


This board is full of pessimistic kids. You guys here jump on any tiny bad news, shove it into a blender, then squish it into the mole hill, stomp on it, and it suddenly becomes a mountain. At the end of the day, the rich landlords says, “speak louder boys and girls, I CAN’T HEAR YOU!”

Rinse and repeat, by 2020, property prices will have doubled or tripled from today’s prices.


re: UBC housing video
Disingenuous beyond the belief of even a cynic such as myself. UBC for many years has developed their property and pocketed the money with little thought to faculty and staff, never mind mere students and neighbours. A considerable proportion of condos has found speculative owners, often off-shore. Affordability for faculty and staff has been problematic for many years; one of the reasons the UBC Faculty Club went bust in 1994 is that so few faculty were within easy driving distance of the club. Now the squeeze is really on as faculty can barely afford to buy a house in Aldergrove. Quelle surprise!


“It’s all up to Flaherty now” – he won’t do a damn thing, he doesn’t have the balls. Why would he move to tear down what took him 6 years to build up? Expect nothing from the smug little leprechaun.

Patiently Waiting

@N: If they are not raising the ceiling, this is going to have nastier effects than if they had tightened a bit the lending requirements. Basically, once the ceiling is reached, they can no longer insure any mortgages, which means something like 90% of the FTB are kicked out of the market…

F is smart… “I’ll let the market decide” while putting a weight a its feet, and throwing it into the ocean. When the SHTF, he’ll come out and say: “I’ve nothing to do with this mess”.

Guy Smiley


It wasn’t me that added that. I only pointed out that CMHC board was more that 50% connected to the RE industry. I think a corporation that handles tax-payer liability giving out mortgage insurance should be alot more arms-length than that.

I don’t care at all what colour the people on that board are – i’d simply like them to be them to be very smart, financially savvy and not in a position to directly benefit from their decisions.


@N: ” comes at the same time as the CMHC is reaching it’s cap and it just happens that the cap is being kept where it is, instead of being increased like it has been up to now.” Interesting when banks are pleading with the Department of Finance to save them from themselves the subtext is that the government affects lending guidelines at the margin via CMHC-insured loans, including the bulk stuff. Maybe I’m wrong here but it almost sounds like Flaherty is telling them to go solo sans 100% backed MI. Genworth has indicated it’s more than willing to fill in, albeit only with a 90% backed. Now why is the CMHC bulk quota a BFD when there’s a willing and able private insurer over at the next stall? Hmmm… I have to admit, for today and today only,… Read more »



So all this BS from Flaherty about how he’s not going to get involved, and he’s just going let the market regulate itself comes at the same time as the CMHC is reaching it’s cap and it just happens that the cap is being kept where it is, instead of being increased like it has been up to now. That’s got nothing to do with the government, of course, and so any downturn will in no way be the fault of the Conservatives but rather part of ordinary free market cycles.

Oh, hand that regulates the markets, how truly invisible you are!


RE UBC housing: thanks for the video.
The same crap as ever, no solid solution. They sell the land to developers and do not care about staff and faculty. I know several families who are getting severely strained / depressed after so many years in a shoebox. And no, moving to Kamloops or Kelowna is not an option for many highly specialized professionals. The only solution is fleeing to the US or Europe (if you can find a job for your spouse).

Very, very tired of it all...

Whoops! Yes, I did forget the link. (I am very, very tired after all.)


Copied from PaulB’s number Date Listing Price(+-) Sold Inv Inv(+-) S/L(%) Mar 01 313 94 123 14,912 5 39.3 Mar 02 251 97 163 14,919 7 64.9 Mar 05 338 134 118 15,069 150 34.9 Mar 06 298 114 163 15,161 92 54.7 Mar-07 260 114 71 15,305 144 27.3 Mar-08 237 106 152 15,345 40 64.1 Mar-09 229 76 69 15,454 109 30.1 Mar-12 306 119 120 15,588 134 39.2 Mar-13 290 122 146 15,640 52 50.3 Mar-14 238 97 133 15,701 61 55.9 Mar-15 208 83 180 15,693 -8 86.5 Mar-16 224 91 97 15,734 41 43.3 Mar-19 319 138 193 15,778 44 60.5 Mar-20 267 118 158 15,837 59 59.2 Mar-21 238 104 153 15,864 27 64.3 Mar-22 219 107 136 15,904 40 62.1 Total-Cur 4,235 1,714 2,175 997 51.4 5 day-avg 253 112 147 42… Read more »