The Globe and Mail reports in its Tuesday, May 7, edition that Bank of Canada Governor Stephen Poloz says banks and other lenders could boost the housing market by offering longer-term mortgages.
The Globe's Barrie McKenna and Janet McFarland write that Mr. Poloz notes lenders often steer borrowers into five-year, fixed-rate mortgages when longer terms might help them get the home they really want.
He says, "There are compelling reasons why it would be helpful to make more use of longer-duration mortgages."
Mr. Poloz is wading into a heated debate over tougher mortgage rules federal regulators introduced in 2016 and 2018. The centrepiece of those changes is a stress test that forces lenders to ensure borrowers can handle a hike of two percentage points in their interest rate.
Just 2 per cent of new home mortgages last year in Canada had terms of longer than five years, notes Mr. Poloz. The Globe adds that nearly half were five-year, fixed-rate mortgages. The rest were either of shorter duration or at floating rates.
Mr. Poloz says it is "unfortunate" the Canadian mortgage market has become so inflexible. Mortgage terms of 10 years, 20 years and even longer are common in the United States and elsewhere.
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