Back in the spring, Julie Dickson, head of the Office of the Superintendent of Financial Institutions, warned that high interest rates could be “very painful.” And while her most current warnings may not sound so dire, when Ms. Dickson spoke to an industry group about the current housing and mortgage market, she still brought with her a watchful tone.
While Ms. Dickson did acknowledge that the measures put into place last year by both the Canadian government and the OSFI were having a desired effect, she also stated, “Nevertheless, this is a market that continues to bear very close watching.”
During the conference she touched on two reports by the International Monetary Fund and the Organization of Economic Co-operation that raised concern over the extremely high price of housing in many Canadian cities, and the fact that those prices did not look as though they were going to moderate any time soon. That, along with the fact that households are more in debt now than at any other point in history, are the two issues these two organizations marked as the biggest red flags.
To that, Ms. Dickson replied, “While not all observers agreed with the extent of the OECD and IMF comments, the continued strength of housing prices across many Canadian cities in the second half of 2013 is undeniable.”
However, Ms. Dickson did not reply on OSFI’s own views, as the organization remains neutral on topics so as not to influence banks and cause them to either pull back more cautiously, or expand their lending portfolio even more so. She did however, have one word of caution for these institutions, saying,
“So OSFI encourages financial institutions to pay considerable attention to the quality of borrowers, both in the current environment and potential future environments.”
Even with these warnings, the OSFI doesn’t seem too concerned. The organization stated early in the year that they were happy with the results after the new OFSI rules went into effect last year, and that they are not going to be making more changes at this time. With the Finance Minister saying much of the same, borrowers can at least rest easy that the borrowing world won’t get flipped on its head once again.
