When you review the Canadian mortgage financing landscape in general, one tends to wonder why rules like this are being made. The mortgage default rate in Canada is well under 1% of mortgages outstanding, compared to the US where it has been close to 20% pver the past few years. In Canada we have never underwritten mortgages in the same manner as was done in the US prior to the credit crisis. Qualifying for a mortgage in Canada has always been more onerous than in the US for people with AAA credit and almost impossible in Canada for people with less than AAA credit. Never has someone in Canada with poor credit been able to get a mortgage from an institution just because they have a pulse, as it was in the US for many years until the credit crisis ocurred.
So what is driving these Canadian rule / policy changes by the government? The answer to this question lies in the age old truth of "following the money". Do the chartered banks make more money on a mortgage with a variable rate under the prime rate of interest? Or on a non-mortgage loan that has an interest rate well above the prime rate of interest, sometimes by many percentage points? In an economic climate of relatively low interest rates on the foreseeable horizon, will the chartered banks make more money on a low fixed mortgage rate in the 3% range or a credit card rate of 19.98%? When these and other similar questions are asked and examined it becomes quite clear who is driving the financial ship in Canada. It certainly is not the people of the country who are driving the financial ship.