The pendulum has swung, but does the combination of government policy and the market’s response risk taking us too far on the other side? That’s a question that needs looking at in Canada, where monetary policy, the foreign exchange market’s response, and regulatory changes could produce too much of a slowing in areas of the economy that had been driving growth.
Let’s count the ways, for example, that various forces are working to contain what had been an overly heated housing market. Rising mortgage rates don’t look all that threatening just yet. But OSFI is discussing a step that will bring uninsured buyers (those with properties over $1 million, or with 20% or more equity) into a much tighter regime that would effectively tack on 2% to the rate used to calculate how much debt they can get.