Sunday, October 29, 2006

Enmity between Bank of Canada and CMHC

There have been rocky relations between the Bank of Canada (BoC), and the embattled Canada Mortgage and Housing Corp (CMHC).

The president and CEO of the CMHC uses unusually strong language to criticize new lending policies announced by the federal corporation over the summer 2006:

I read with interest and dismay your press release of June 28 which indicated that CMHC would offer mortgage insurance for interest-only loans and for amortizations of up to 35 years.

Particularly disturbing to me is the rationale you gave that 'these innovative solutions will allow more Canadians to buy homes and to do so sooner'.

We were reassured by the fact that CMHC's interest-only mortgage product includes no change in mortgage qualification criteria and as such would not be of significant concern to the bank

The CMHC's actions are likely to drive up house prices and make homes less affordable, not more.

By stoking inflation with proposed new policies, the CMHC is undermining the work of the BoC with "very unhelpful" actions.

The letter then upbraided the agency for blindsiding key government institutions.


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