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Housing Finance in Canada: Looking Back to Move Forward

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  • Schembri, Lawrence L.

Abstract

The Canadian system of housing finance proved to be resilient and efficient during the global financial crisis and its aftermath. The system's effectiveness is the result of a rigorous prudential regulatory and supervisory regime coupled with targeted government guarantees of mortgage insurance and securitisation products. In the post-crisis period, household debt levels and house prices have risen, owing, in part, to accommodative monetary conditions necessary to support the economic recovery. These vulnerabilities were mitigated by tightening macroprudential policy, specifically mortgage insurance rules, and strengthening mortgage-underwriting standards. Looking ahead, the housing finance framework needs to be adjusted and strengthened by rebalancing the risk exposures away from the government towards the private sector participants in the housing finance market. Although some measures have already been taken for this purpose, more adjustments may be needed to create the right incentives and achieve a sustainable rebalancing in risk exposures. Measures should also be considered to promote a liquid private-label mortgage securitisation market in Canada.

Suggested Citation

  • Schembri, Lawrence L., 2014. "Housing Finance in Canada: Looking Back to Move Forward," National Institute Economic Review, National Institute of Economic and Social Research, vol. 230, pages 45-57, November.
    • Handle: RePEc:cup:nierev:v:230:y:2014:i::p:r45-r57_14
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    Cited by:

    1. Alan Walks & Brian Clifford, 2015. "The political economy of mortgage securitization and the neoliberalization of housing policy in Canada," Environment and Planning A, , vol. 47(8), pages 1624-1642, August.

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