OTTAWA (Reuters) - Canada Finance Minister Joe Oliver dismissed on Wednesday the idea that interest rates are so low they are spurring Canadians to buy homes they cannot afford.
“We‘re, of course, monitoring the market. It’s not a huge concern at this point,” he told reporters.
“I’ve said again and again we don’t think there’s a bubble - the Bank of Canada agrees with that, CMHC (Canadian Mortgage and Housing Corp), OECD (Organization for Economic Cooperation and Development).”
Canada escaped the housing crash of 2007 in the United States that triggered the global financial crisis, and experienced a post-recession property boom as borrowing costs hit record lows. The jump in home prices and parallel rise in household debt has caused some to warn that a bubble is forming.
Oliver’s predecessor, the late Jim Flaherty, repeatedly tightened rules around government-backed mortgages in a bid to cool the market. Oliver has shown little indication he plans similar moves.
The Bank of Canada last week surprised markets by cutting rates to 0.75 percent, citing a threat to economic growth and its inflation targets from the steep plunge in the price of oil.
Some think the move could reignite housing just as the market had finally begun to cool.
“We’re watching the personal debt. It is something that we’re monitoring fairly carefully because it is a serious issue,” Oliver said.
But he said debt-service ratios were better than in the past, due to low interest rates.
Major Canadian banks said on Tuesday they would lower their prime lending rate by 15 basis points in response to the central bank easing, though that is less than the 25 basis point cut the central bank made.
Asked for his comment about the divergence between the lending rates, Oliver called it a “private sector decision.”
Reporting by Leah Schnurr, additional writing by Randall Palmer; Editing by Peter Galloway, Jeffrey Hodgson and Gunna Dickson