New mortgage regulations are needed. Canada’s real estate market and consumer debt levels have risen to unsustainable levels, and unless new mortgage regulations are introduced, a sharp correction in both would be disastrous for the economy, warned chief economist with TD Bank, Craig Alexander. He says that the real estate market is overvalued by 10 to 15 per cent nationally and this is connected to the rapidly climbing household debt ratio.
“We need to acknowledge that a significant imbalance has developed and it poses a clear and present danger to Canada’s medium-term economic outlook. It also suggests that further actions to constrain lending growth may be prudent,” he added.
Meanwhile, RBC fixed income strategist Ian Pollick claimed: “There are reasons to expect huge volumes of mortgage applications this year, which will contribute to a very weak four- and five-year sector of the curve.“
Specialists see only two options: if the mortgage regulations are introduced, Canada’s debt and overvalued real estate market will affect the whole economy, but not as much as it would if the regulations weren’t introduced. The question now isn’t whether interest rates will rise, but when.