The country’s mortgage market should evolve in a way that gives Canadians more choice and helps the economy become more flexible while lowering the level of risk in the system, Bank of Canada Governor Stephen Poloz said.
In a speech to the Canadian Credit Union Association and Winnipeg Chamber of Commerce on Monday, Poloz said that financial flexibility and the proper sharing of risk are essential because they help people adapt to changing circumstances and the economy adjust to shocks. These issues, according to him, become particularly relevant when people buy a home and take out a mortgage.
While Canadian homeowners and financial institutions have been well-served by the mortgage market, “we could look at ways to develop a more flexible mortgage market that gives more choice to customers, lenders and investors, while making the market safer and more efficient,” Poloz said.
Poloz discussed three areas where the country’s mortgage market could be more flexible: diversifying mortgage terms to encourage longer loan terms, developing a market for private mortgage-backed securities, and encouraging different mortgage designs. Shared equity mortgages, according to him, should help improve the financial system’s resilience and the economy’s ability to adjust to shocks.
It is “important to think about ways to innovate and make a good system better so that borrowers and lenders can make choices that better suit their circumstances,” Poloz said.