MPs criticize Flaherty's mortgage move
Flaherty persuades Manulife to rescind mortgage rate cut
- Rathgeber, Rae, Bernier all comment on tactics
Jim Flaherty's latest intervention in the mortgage market has drawn the ire of some of his fellow parliamentarians.
Small Business Minister Maxime Bernier believes the finance minister overstepped his bounds by having his office phone Manulife Financial and ask that it withdraw its discount on five-year mortgages to 2.89 per cent from 3.09, which it did.
Bernier told reporters Wednesday he would not have done it.
"Me, personally, I would not dictate to businesses what prices to decide," he says.
"It's the market. It's supply and demand that decides the prices. It is the case for interest rates, it is the case for other products, too."
Fellow Conservative MP Brent Rathgeber, from the riding of Edmonton-St. Albert, was more guarded in his comments, saying there are other tools the government could employ to keep a lid on housing.
"My own personal preference would be to let the market determine the rates and to have good healthy competition between players in the market. But if the minister's concerned there are other tactics I think that can be taken," Rathgeber said, suggesting a further tightening of CMHC rules could be effective.
"I anticipate we will receive some concerns, particularly from individuals who are in the mortgage application process," Rathgeber said.
Flaherty came under attack Tuesday from opposition leaders who accused him of interfering with decisions of private businesses acting under the rules he set, and of making it more expensive for Canadians to purchase a home.
On Wednesday, interim Liberal Leader Bob Rae also questioned Flaherty's tactics.
"You don't want ministers of finance instructing the banks to go out and lend to people who are not in a position to pay it back," Rae said. "But the quid pro quo for that is to say that the government should keep its hands off — should keep its mitts away — from telling the banks or credit unions or any financial institution what price they should be charging for the products that they're offering."
"That has nothing to do with creditworthiness, and it's a completely inappropriate activity by the minister of finance," Rae said.
In a statement, Manulife said it had restored the higher rate "after consulting with the Department of Finance."
In effect, Flaherty was using moral suasion — applying his influence as the country's chief financial officer — to persuade the lender to keep the mortgage rate where it was.
It wasn't the first time Flaherty had intervened in the financial sector.
Earlier this month, the minister personally phoned the Bank of Montreal to complain about its decision to lower the five-year rate to 2.99 per cent. BMO did not reverse its position after the call, and the rate remains unchanged.
At a press event in Toronto where the finance minister was continuing the custom of buying shoes before the federal budget is unveiled, Flaherty reiterated that it was his concern for Canadians' financial health that prompted his action.
"Our concern, my concern for a number of years, with very low interest rates is to ensure that people can afford their mortgages, when interest rates go up," Jim Flaherty said at a Roots store in Toronto, while trying on shoes.
'Inevitably, interest rates will go up'—Jim Flaherty
"That's the concern for the Canadian people … that they don't assume that very low interest rates like we have now will continue indefinitely, because they won't," he said.
"Inevitably, interest rates will go up."
For its part, the Canadian Bankers Association, which represents Canadian lenders, had little to say on Flaherty's move.
"The CBA does not comment on the individual business decisions of its members," the CBA said in a statement. "Banks take seriously their responsibility to lend prudently and have a strong track record as careful lenders."
With files from The Canadian Press