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.
