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Canada’s finance regulator sends ‘early warning’ to banks on lending

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guest | 28 Sep 2011, 02:45 PM Agree 0


Julie Dickson, superintendent of Financial Institutions (OSFI), said her office is “stepping in to increase the monitoring” of home mortgages and lines of credit secured by real estate.TD Economics recently noted in an economic report that the household debt-to-income ratio had reached 147% in the second quarter of 2011. The report explained a ratio of 138% to 142% is considered “appropriate."But the trouble might only be starting. TD Economics warned the debt-to-income ratio would rise to 150% by the end of 2012, then 151% by 2013.Moody’s Investors Service similarly said last week that household mortgages threaten the Canadian banking system.Dickson said she is hoping to send an "early warning" to banks about the issue, also working with Bank of Canada Governor Mark Carney and federal Finance Minister Jim Flaherty.Analysts in a Globe and Mail story explained Dickson’s comments relate concerns that housing prices could decline in Canada and unemployment could increase, thus putting added pressure on borrowers.
 
  • Geoff Lander | 28 Sep 2011, 04:59 PM Agree 0
    Home Mortgages are the problem?

    Based on the mortgage applications I see coming across my desk, perhaps high levels of unsecured consumer debt {ie. credit cards} should be cause for more concern than residential mortgages.

    I guess paying 22+% interest on these unsecured balances is economically smart compared to paying highly affordable interest rates on mortgages that have been extended in a traditionally conservative lending environment.

    Makes you wonder who's calling the shots...
  • Geoff Lander | 28 Sep 2011, 05:59 PM Agree 0
    Home Mortgages are the problem?

    Based on the mortgage applications I see coming across my desk, perhaps high levels of unsecured consumer debt {ie. credit cards} should be cause for more concern than residential mortgages.

    I guess paying 22+% interest on these unsecured balances is economically smart compared to paying highly affordable interest rates on mortgages that have been extended in a traditionally conservative lending environment.

    Makes you wonder who's calling the shots...
  • Deanna | 28 Sep 2011, 10:05 PM Agree 0
    Excellent point Geoff
  • Deanna | 28 Sep 2011, 11:05 PM Agree 0
    Excellent point Geoff
  • blair | 03 Oct 2011, 08:30 PM Agree 0
    I think you hit it on the head Geoff.

    Most clients I see can afford their housing costs it's the unsecured mortgages and credit card debt that is putting presure on them.

    As you know its harder to help out people who can only refinance to 85% LTV now.

    They are barking up the wrong tree.
  • David | 03 Oct 2011, 08:33 PM Agree 0
    Head of OSFI usually a CA from a BIG firm who used to be responsible for audits of banks. Check history of past Supers.
    So you now audit banks for the government , that you used sign off on behalf of a CA firm..... Of course everything is fine!

    Ms Dickson is about 5 years to late in sending her smoke signal.

    Geof possibly the signal is to the consumer too. Don't crank up the credit cards because you may not be able to cash out by using your house like an ATM.
  • Wayne Campbell, Invis-Prince George | 03 Oct 2011, 08:47 PM Agree 0
    Blair and Geoff are bang on!

    Put the minimum monthly payments on credit cards back to 5% and people will realize that they have a problem long before it's too late to help them.

    Mortgages are the solution here, not the problem!
  • John | 03 Oct 2011, 08:54 PM Agree 0
    So if I make $100k/year and I have $150K in total debts the government tells me this is a bad thing. Well if that is all credit card debt then sure, that might be a little high. But since I have committed to paying that $150K off over the next 25 to 30 years, I believe the government should stay out of my personal finances. This economic downturn throughout the world was not caused by me over borrowing against a secured asset. It happened because mortgages were bundled up and sold off as quality when in fact those trading these instruments were simply lying to whom they sold to. Me thinks the government needs to higher decision makers who have degrees in, well economics to start. While I understand most politicians have law degrees, doesn't that in itself make them all whores and liars?
  • blair | 03 Oct 2011, 09:30 PM Agree 0
    I think you hit it on the head Geoff.

    Most clients I see can afford their housing costs it's the unsecured mortgages and credit card debt that is putting presure on them.

    As you know its harder to help out people who can only refinance to 85% LTV now.

    They are barking up the wrong tree.
  • David | 03 Oct 2011, 09:33 PM Agree 0
    Head of OSFI usually a CA from a BIG firm who used to be responsible for audits of banks. Check history of past Supers.
    So you now audit banks for the government , that you used sign off on behalf of a CA firm..... Of course everything is fine!

    Ms Dickson is about 5 years to late in sending her smoke signal.

    Geof possibly the signal is to the consumer too. Don't crank up the credit cards because you may not be able to cash out by using your house like an ATM.
  • Wayne Campbell, Invis-Prince George | 03 Oct 2011, 09:47 PM Agree 0
    Blair and Geoff are bang on!

    Put the minimum monthly payments on credit cards back to 5% and people will realize that they have a problem long before it's too late to help them.

    Mortgages are the solution here, not the problem!
  • John | 03 Oct 2011, 09:54 PM Agree 0
    So if I make $100k/year and I have $150K in total debts the government tells me this is a bad thing. Well if that is all credit card debt then sure, that might be a little high. But since I have committed to paying that $150K off over the next 25 to 30 years, I believe the government should stay out of my personal finances. This economic downturn throughout the world was not caused by me over borrowing against a secured asset. It happened because mortgages were bundled up and sold off as quality when in fact those trading these instruments were simply lying to whom they sold to. Me thinks the government needs to higher decision makers who have degrees in, well economics to start. While I understand most politicians have law degrees, doesn't that in itself make them all whores and liars?
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