/Posthaste Jan. 21: It’s about time we replaced Canada’s five-year mortgage renewal market with longer term loans

Posthaste Jan. 21: It’s about time we replaced Canada’s five-year mortgage renewal market with longer term loans


Good Morning!

A new report by C.D. Howe recommends that the Canadian government should take measures to discourage the five-year mortgage market and create an environment where lenders are comfortable offering longer term mortgages.

“For longer-term mortgages to comprise a significant portion of the entire Canadian mortgage market it will likely be necessary for the federal government to modify certain rules that are currently geared towards a five-year mortgage market,” wrote Michael Feldman, a partner at Torys LLP, in a report for think tank C.D. Howe.

Longer-term mortgages would enhance both consumer choice and financial stability, but regulatory changes are needed to help them develop into a significant part of the Canadian residential mortgage market, the report notes.

The report recommends loosening the stress test requirements for longer-term mortgages, amending the part of the Interest Act that favours the five-year mortgage market, increasing covered bond limits, and developing the market for private residential mortgage-backed securities.

“These securities (which would not be backstopped by the government through CMHC) would help both lenders and borrowers seeking long-term mortgages and investors seeking alternative longer-term investments,” the report noted.

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TSX and U.S. futures are falling on China’s virus worries that has already sent a chill across Asia. Authorities in China confirmed that a new virus could be spread through human contact, reporting 15 medical staff had been infected and a fourth person had died.

“I’m not an expert in the pandemics, but you can look at previous examples like the SARS outbreak which also originated from Asia,” Cristian Maggio, Head of Emerging Markets Strategy at TD Securities in London, told Reuters.

Noting that China had initially downplayed the full extent of the SARS outbreak, he said “I think the market might be fearing something similar.”

Here’s what you need to know this morning:

  • Prime Minister Justin Trudeau will hold a media availability in Winnipeg
  • Extradition hearing for Huawei executive Meng Wanzhou in Vancouver
  • The Tsileil-Waututh First Nation of B-C joins the National Congress of American Indians, Affiliated Tribes of Northwest Indians, Lummi Nation and Makah Tribe to formalize their commitment to protect wild salmon and their solidarity with the United Tribes of Bristol Bay by signing the Bristol Bay Proclamation in Seattle
  • Statistics Canada to release is monthly survey of manufacturing for November
  • Premier Jason Kenney and Associate Minister Grant Hunter will continue Red Tape Reduction Awareness Week with a look back at the first seven months of red tape initiatives in Calgary
  • Manitoba Ag Days, an agriculture exposition, features Premier Brian Pallister speaking about the province’s climate plan in Brandon

Ten years ago, to encourage more measurement in this important area, the Canadian Federation of Independent Business created an annual Red Tape Report Card on regulatory measurement and accountability, write Laura Jones, Chief Strategic Officer at the Canadian Federation of Independent Business, and Patrick McLaughlin, Director of Policy Analytics and Senior Research Fellow at the Mercatus Center at George Mason University.

To get a decent grade, governments only have to do three simple things: show political leadership, measure the regulatory burden, and create some kind of regulatory cap or budget (e.g., a reduction target or a policy that for every new regulatory requirement introduced, one is eliminated). A decade ago, most governments in Canada resisted the idea that regulatory measurement had any value and no government was getting an “A.” Read their latest findings about the state of bureaucracy in Canada.

 

— Please send your news, comments and stories to [email protected]. — Yadullah Hussain @Yad_Fpenergy

With files from The Canadian Press, Thomson Reuters and Bloomberg

 

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