6 May 2019

Since July 2017, there were five rate hikes by the central bank, followed by four rate meetings without changes. Moreover, last time the Bank didn’t talk about the necessity of a rate increase in the future.

According to Poloz, the mortgage sector has been performing well, but a more creative approach could improve it, pointing to making longer-term fixed-rate mortgages more attractive for borrowers.

He says 45% of all mortgages have a five-year term with a fixed interest rate. However, only 2% of the mortgages this year had a term longer than five years.

The deal is that longer term makes it possible to renew with the risk of a higher rate less often. Besides, it also helps increase the equity in your property.

“Longer-term mortgages can strengthen the financial system safety and improve economic stability”, – he noted.

Borrowers can’t purchase mortgage insurance in case they apply for a mortgage with a house cost exceeding C$1 million ($746,000) or if they want to buy the second home.

Poloz believes it’s important to develop and support a private market for mortgage-backed securities, as it may become a good resource of long-term funding for uninsured mortgages with a higher flexibility.

“Yes, the risks are higher than in case of non-risky bonds, but not significantly”, – he added.

“In other words, the company which owns the bonds can offer mortgage products in the uninsured space at a more affordable cost”.

Poloz also stressed that transparency of the system will be highly important, as mortgage-backed securities were in the center of an economic crash which was followed by the 2008 financial crisis.