Today you made the following statements regarding the Canadian housing market:
"We expect prudence from lenders," he said. "We expect, and we have confidence in, prudence from Canadians. We remind people that borrowing is for the period you are going to borrow, not just for the moment you take out the loan."
That is a concise statement and echoes what many people have been saying for some time. However this appears to be a case of CYA so in 2011 you can say "hey, look! I told people to be prudent", while still allowing the heightened demand for housing contribute to precious green shoots.
You don't need to remind borrowers of anything. All that needs to be done is for CMHC to require qualifying income to be set for more normal interest rates. If CMHC ensured that borrowers could handle more normal rates that would limit the downside if/when rates increase. For example it would be more reasonable if CMHC required a qualifying rate of 6% to insure these mortgages.
Obviously people are qualifying and depending on super low interest rates. This has been going on for awhile. Consider the quote from the July 2nd article First time buyer like low rates:
What really helped? The 2.75-percent interest rate they were offered. It ultimately allowed them to move from a $1,800-a-month apartment into their own home.
“But we don’t have a lot of [wiggle] room,” Morettie said. “We can go up to four percent, but then we’re done.”