Copying Canada’s Mortgage Rules?

14 09 2013

Selling Houses in Quebec

Many in the UK are now concerned that we are experiencing a property bubble, particularly in the overheated London market. The Bank of England and other in the UK are looking at how Canada responsed to a similar bubble in 2006-8. The interest in Canada is likely related to the fact BofE Governor Mark Carney is from there.

A recent study from the RCIS, a think-tank, includes a case study of Canada case study 2008-2012:
The Canadian housing market began to heat up
markedly in the wake of the global financial
crisis. This is because, first, the Bank of Canada
cut interest rates aggressively as the global
outlook became increasingly uncertain (and also
to prevent a major appreciation of the Canadian
Dollar given that most other developed market
central banks, including the US Fed, were
aggressively loosening monetary policy).
Second, the Canadian banking system was
relatively unscathed by the sub-prime crisis
(unlike the US, EU and the UK). Extraordinarily
low interest rates coupled with a healthy banking
system resulted in a surge in mortgage debt
levels and house price growth. Indeed,
mortgage backed security issuance rose from
just over $CAD80bn in 2007 to just over
$CAD140bn in 2008, while annual house price
growth exceeded 15% on some key measures
the following year. Subsequently, the Canadian
authorities stepped in with a series of measures
over the next four years to cool the housing
market

You can read the full study here. The report was prepared by Josh Miller  RICS Senior Economist 

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