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CAAMP 2009 – Benjamin Tal

Over the next few days, we’ll be posting insights from the 2009 Canadian Mortgage Conference and Expo in Toronto.

Benjamin-TalKicking off the speaker line-up today was noted CIBC economist, Benjamin Tal.  Ben spoke to over 1,000 delegates, and below are some of the key quotes and observations he shared with the crowd…

  • “This (credit) crisis is over,” he said.
  • The TED spread—which is a key indicator of credit market liquidity—is back to a healthy 25 basis points, after hitting 500 last fall.
  • “This recession is over…period…but we will pay heavily for what the U.S. Fed is doing.” (Interest rates will rise and deficits will drag on Canada’s economy.)
  • The next wave of U.S. mortgage rate “resets” will peak in late 2011. Fortunately, there should be much less of a rate shock this time around because:
    • Americans will reset into rates that are much closer to the “teaser” rates they’re paying now.
    • Fewer of these resetting loans are securitized than in the subprime crisis. Most of these mortgages sit on U.S. lenders’ balance sheets.
  • “Deleveraging” will define the next 5 years. Consumers will slow their spending and borrowing.
  • U.S. monetary policy is dictating Canadian policy.
  • The Bank of Canada “will have no choice” but to wait to raise rates until the U.S. does.  Otherwise, our dollar would rise and threaten Canada’s export economy.
  • Ben predicts Canadian interest rates will not rise as much as in the U.S.

Regarding real estate prices, Tal said:

  • “We should not be in a sellers’ market in the 9th inning of recession.”
  • On the other hand, he says: “We don’t have the information to support (a real estate bubble).  It’s irresponsible to say we’re in a bubble.”
  • But if prices go up 20% in the next two years, “then we will be in bubble.”
  • Policy makers in “Ottawa are worried,” but they shouldn’t be completely alarmed just yet, suggests Tal.
  • “People feel pressured to buy because of (low) interest rates, but that is fine,” he says, “because Canada’s real estate market reflects fundamentals and is in “equilibrium.”
  • Housing performance confirms that monetary policy is “acting the way it should be.”
  • More than ever, it is paramount that lenders underwrite “good mortgages.”
  • In every past economic cycle, interest rates went up “much faster than they went down.”
  • Expect a 2% to 3% increase in rates, starting no earlier than Q3 2010.  If you cannot handle the debt service at those higher rates, “buy a smaller house. It’s as simple as that.”

Tal also said Canada is in a much stronger place than our southern neighbour. His reasons:

  • The duration of unemployment (which is “as important as unemployment rate”) is much lower in Canada.  That means Canadians can more easily get replacement jobs to pay their mortgage if they lose work.
  • Canada has “three times more cash savings” than Americans per capita. This cash is waiting to be “redeployed.”
  • “Income is rising twice as fast in Canada as in U.S.”  (Which is why Canadian consumer confidence is so much higher than in U.S.)
  • “It’s all about (consumer) confidence,” Tal says.
  • Canada will outperform all other G7 countries in GDP growth in 2010.

Tomorrow, we’ll cover insights from the conference’s lender panel…



The 2009 Canadian Mortgage Conference and Expo is a production of the Canadian Association of Accredited Mortgage Professionals (CAAMP).

Established in 1994, CAAMP is Canada’s national mortgage industry association. CAAMP has over 12,000 members, consisting of mortgage lenders, brokers, insurers and other industry participants.