Flaherty comfortable with Canada's housing situation, his health

Mon Sep 9, 2013 12:38pm EDT
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By David Ljunggren

OTTAWA (Reuters) - Canada's housing market, which once caused concern about possible overheating, has evolved in a satisfactory way, Finance Minister Jim Flaherty said on Monday.

Canada did not suffer a U.S.-style housing crash during the world economic downturn. Though its housing market slowed in 2012 after new rules were put in place, the market has since built up steam, prompting a debate as to whether it has managed a soft landing or is due for a crash.

The government and regulators tightened mortgage insurance rules and underwriting guidelines several times between the financial crisis and 2012. Flaherty told a news conference he was comfortable with the way things had turned out.

Flaherty also said his health had improved significantly since earlier this year. The minister has a rare skin disease, which can lead to other complications.

Bank of Nova Scotia Chief Executive Rick Waugh said last week that authorities should raise interest rates rather than impose more regulations if it fears a bubble, since any exuberance was a reaction to low rates.

Asked to react to that, Flaherty said: "I'm comfortable with the way the housing situation has evolved. I tightened the rules on mortgage insurance four times in the past several years, and OSFI has also taken some action, the superintendent of financial institutions, and I'm comfortable with what I've seen."

He noted that while the Bank of Canada's overnight rate had not risen, mortgage interest rates have gone up.

Building permits in Canada jumped 20.5 percent in July, but mainly due to plans for commercial buildings. The value of housing permits rose by a relatively tame 4.1 percent after a 12.8 percent fall in June, and were 3.4 percent below levels of a year earlier.   Continued...

Canada's Finance Minister Jim Flaherty steps out of a recreational vehicle after making an announcement in Ottawa September 9, 2013. REUTERS/Blair Gable