“Canada’s deputy minister of finance says he isn’t convinced tighter mortgage rules his department announced in June are behind the recent cooling in the housing market.
In a rare public speech, Michael Horgan argued that recent comments linking the two are premature.
“There’s some evidence that the housing market, particularly in some markets, is cooling and slowing at the moment,” he said Monday during a presentation to business students at Carleton University. “We read a lot of press commentary that’s saying it’s because of the government’s changes to mortgage insurance rules. I think it’s actually too early to make the direct link.” …
It is the kind of analysis that leaves Mr. Horgan unconvinced. While he says there is likely some cause and effect at this point, he suspects it is more likely that Canadians are starting to realize their household debt levels need to be addressed.
Mr. Horgan pointed to data released this month that the ratio of market household debt to disposable income hit 163 per cent in the second quarter, which the deputy minister noted is at similar levels as those in the United States before the recession.”
– from ‘Finance official questions link between cooling housing market, mortgage rules’, Bill Curry, G&M, 29 Oct 2012 [hat-tip allen]
We agree with Mr Horgan.
See our post from last month ‘Erroneous Theories For Falling Prices #5 – Tightening Of Mortgage Rules Caused The Crash‘
The Canadian bubble was already beginning to collapse under its own weight; mortgage rule tightening may have helped it along a bit.
Posters on this site have already pointed out that in Vancouver our RE sales, and, to a lesser extent prices, were already in decline before the new rules were even announced.