Poloz talks mortgages: Innovation could improve flexibility – Bank of Canada

Canadian homeowners and financial institutions have been well-served by our mortgage market, but making it more flexible and sharing the risks involved in home loans could benefit borrowers, lenders and investors. In his speech in Winnipeg, Governor Poloz talks about housing markets in Canada and explains how innovation could improve the mortgage market.

Housing sector still adjusting

Overall, the housing sector should return to growth later this year. Recent changes to provincial and municipal housing policies, mortgage lending guidelines and interest rates are working their way through the market. The situation is different across Canada:

While financial institutions have added new ways to sell home loans and give Canadians access to home equity, the actual mortgage product itself hasn’t changed much over time.

Nearly half of Canadian mortgages have a fixed interest rate and a five-year term. While it is a popular choice, there are good reasons to encourage more longer-term mortgages:

Innovation in funding and design

Changing mortgage products could mean lenders change the way they fund or design the home loans they offer to Canadians. Governor Poloz outlined two possible changes:

A strong past, a better future

Canada’s mortgage market has worked well in the past, and recent changes to mortgage guidelines have helped improve the quality of new mortgage debt. The Bank of Canada wants to encourage a safe and efficient financial system that evolves to foster resilience and allow people to make the choices that are right for them.