Ed Clark is the CEO of Canada’s 2nd largest lender: TD Bank, but he’s heading out in November.
He has some interesting things to say about mortgage lending in Canada:
“It’s just not realistic in a competitive marketplace to say, ‘Why doesn’t one bank lead the way and change the rules?’ It won’t happen. This is a responsibility of the government,” he told Reuters.
“I get why they keep worrying about doing it. But I think you have to just keep touching this brake. As long as you run low interest rates, you then should be continuously leaning against asset bubbles.”
Why is it not realistic for an individual bank to change lending rules? Because they would be the chump to leave money on the table. If your business had an oppourtunity for income which the government would insure against loss, how much sense would it make to not take advantage of that business?
And you’ve got to love this seemingly prerequisite paragraph that comes next in all of these articles:
Canada’s Conservative government has stepped in four times since 2008 to tighten mortgage lending rules to cool a real estate market that flourished as the financial crisis ebbed.
It is accurate to say that the government has stepped in four times since 2008 to tighten mortgage lending rules, but it omits the change before 2008. For those of you just tuning in they look something like this:
↑•March ’06: CMHC change to allow 0% down, 30 year Amort.
↑•June ’06: Allow 35 year amort & interest only payments for 10 yrs
↑•Nov. ’06: Aw heck, lets go all out and allow 40 year amorts!
↑•April ’07: Insured min. down payment moved from 25% to 20%
↓•Oct. ’08: 5% down allowed, amort moved back to 35 years
↓•April ’10: Require approval at 5 year fixed rate
↓•March ’11: Drop back down to 30 year amorts.
↓•July ’12: Drop back down to 25 year amorts.
Shouldn’t we take into account how much gas was applied before we started tapping the brakes?