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Canada’s Oliver Monitoring Mortgage Market After Banks Cut Rates

Bloomberg logoBloomberg 27-03-2014 Theophilos Argitis and Doug Alexander

March 27 (Bloomberg) -- Canadian Finance Minister Joe Oliver said he’s monitoring the mortgage market after banks cut their lending rates to the lowest in about a year ahead of the spring home-buying season.

Oliver, who replaced Jim Flaherty on March 19, said the government has already taken steps to ensure households don’t take on too much debt.

“Our government has taken action in the past to reduce consumer indebtedness and the government’s exposure to the housing market,” Oliver said in an e-mailed statement today. “I will continue to monitor the market closely.”

Citing lower government bond yields, Bank of Montreal yesterday cut its five-year fixed mortgage rate to 2.99 percent from 3.49 percent. The Toronto-based bank cut its mortgage rate to that level a year ago, drawing the ire of Flaherty, who was concerned the cheap financing would stoke an overheated housing market.

“This rate change is driven solely by the fact that bond yields have fallen and we are in what has traditionally been the busiest season for buying a home,” Paul Deegan, spokesman at Canada’s fourth-largest lender, said in an e-mailed statement.

The yield on Canada’s five-year government bonds, the benchmark security for mortgage lending, fell to an eight-month low of 1.51 percent on Feb. 3, dropping from as high as 2.16 percent in September. It has since gained, yielding 1.71 percent this morning.

Other banks are offering mortgages below 3 percent, including Toronto-Dominion Bank’s special rate of 2.97 percent on a four-year mortgage. Bank of Nova Scotia, the third-largest lender, on March 19 announced a four-year mortgage rate of 2.94 percent.




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To contact the reporter on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net Chris Fournier

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