(Adds mortgage offers)
By Andrea Hopkins
May 14 (Reuters) – Canadian Prime Minister Stephen Harper
warned on Thursday that some consumers are overexposed to
mortgage debt even if the housing market remains stable, a rare
nod by the government to high consumer debt levels in an uneven
housing market.
Reiterating his stance that Canada’s housing market should
be strong and stable “over the longer term”, Harper said his
Conservative government would not consider a tax on foreign
purchases of real estate.
While Australia already restricts foreign real estate
investment, Canada does not even track it. Some analysts believe
a tax on foreign buyers would cool hot markets in Toronto and
especially Vancouver, where a backlash against wealthy Chinese
homebuyers is building.
Harper said he was not considering such a tax “at the
current time” but said the government is watching the housing
market closely.
“Now, all of our data indicate that – both for lenders and
for borrowers at low interest rates – this debt is very
manageable. But there are some people who are overexposed, so we
encourage people to exercise caution in terms of their
borrowing,” Harper told reporters during an appearance in
Windsor, Ontario.
“It remains our analysis … that the Canadian housing
sector should be strong and stable over the longer term,” he
added.
Canadian house prices are at a record high nationally and in
Toronto and Vancouver but have cooled dramatically in some other
markets, including the oil-industry capital of Calgary. Home
prices in nine of Canada’s 11 major cities have passed their
peak, according to the Teranet-National Bank price index.
Still, national house prices have risen 37.8 percent since
June 2009, when the global financial crisis stalled price gains,
according to the Teranet-National Bank house price index.
Vancouver prices are up 42.3 percent and Toronto prices are up
59.2 percent in the same period.
While the household debt-to-income ratio is at a record high
163.3 percent, Canada’s big banks continue to roll out new
mortgage products with low introductory rates, an innovation
that reminds some of the U.S. subprime lending model that left
many borrowers unable to cope when interest rates eventually
rose.
Canadian Imperial Bank of Commerce was offering on Thursday
to “lower your mortgage rate for nine months” by charging an
introductory rate of 1.99 percent on a four-year fixed-rate
mortgage. Even without the offer, mortgage rates are near
historic lows in Canada, often below 3 percent.
(Additional reporting by David Ljunggren in Ottawa; Editing by
Peter Galloway)
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Keywords: CANADA POLITICS/MORTGAGES