No need for mortgage market structural shift: Bank of Canada

Feb 4, 2010, No need for mortgage market structural shift: BoC

WINNIPEG, Manitoba (Reuters) – The head of the Bank of Canada said on Thursday he does not see a housing bubble currently, nor does it see the need for structural change in the country’s mortgage market.

“The Canadian mortgage market has functioned I think exceptionally well during the course of the last decade … we’ve seen the strength of the system of mortgage insurance and it’s provided an important funding avenue for the banks as well. It’s allowed our housing market to weather the storm,” said Governor Mark Carney.

“I must say we don’t see a need for structural change in the mortgage market.”

He was responding to audience questions after a speech in Winnipeg where he said the Canadian economy is looking up and should recover lost ground this year.

Carney also said he would not describe current housing market strength as a housing bubble.

“We had expected strength in the housing market given where monetary policy was. We’ve seen it. We are following it closely but we would not characterize the current state of the housing market in those terms.”

Carney said the central bank continues to be concerned about the pace of household borrowing, a point he has been driving home to Canadians to prepare them for eventual rate hikes.

“We want to caution people that rates are extraordinarily low right now, they’re low for a reason … but it’s a means to an end.”

The central bank pledged last April to keep interest rates at record lows until the end of June 2010, a pledge it has since reiterated with each successive interest rate decision and speech by bank officials.

(Reporting by Rod Nickel, Randall Palmer and David Ljunggren; writing by Ka Yan Ng; editing by Jeffrey Hodgson)