January 21, 2020
Partner Michael Feldman published a paper with the C.D. Howe Institute examining current Canadian mortgage periods and the steps that can be taken to encourage longer-term mortgages. Michael explains how longer-term mortgages could offer greater consumer choice and increase financial stability.
“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”, Michael writes.
Revising current stress tests, amendments to section 10 of the Interest Act and increasing covered bond limits are just some of the changes the federal government would likely have to consider for longer-term mortgages.
Michael continues, “it will not only be necessary to reduce the impact of existing regulatory distortions; it will also be necessary to create consumer demand for longer-term mortgages to overcome the inertia of existing strong conventions in the Canadian residential mortgage market”.
“[O]nce the yield curve reverts to a more common rising curve, a demand for longer-term deposits may develop”.
Read Michael’s complete paper with C.D. Howe Institute here.