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“Enough is Enough”

PwCThat’s the title of a commentary by PricewaterhouseCoopers (PwC) about the federal government’s repeated mortgage rule changes.

In its recently released Consumer Lending Survey, PwC says:

  • “…We’ve seen significant restrictions placed on the use of government-backed insured mortgage lending.”
  • “…It’s not clear how changing so many lending variables in such a short span of time will affect Canada’s residential lending and, by extension, its housing market.”
  • If “more people than expected…find themselves unable to buy into the market or move up…housing supply could quickly outstrip demand and potentially put pressure on prices.” (This was the Finance Minister’s intention to a certain degree.)
  • “…Policymakers should consider avoiding further changes to mortgage lending until they can better assess the impact of the changes they’ve already made.” (That’s what the Department of Finance (DoF) is reportedly doing. It’s also what the DoF was reportedly doing last spring when it announced the last round of mortgage rules.)

Other factoids from the report:

  • Big-BanksResidential lending accounts for 35% of Canadian banks’ income.
  • To counter the decline in residential lending, PwC touches on various options including “Interest rate price wars.” It calls those “a potential option,” but one that trades “short-term market share gains for long-term margin compression.”
  • PwC recommends that lenders consider:
    • “Improving interest rate spreads through better insights on pricing…”
    • “Improving the customer experience…”
    • “Aggressively managing costs…(including outsourcing)”

Rob McLister, CMT