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Morneau Out. The Mortgage Impact

Canada’s Finance Minister influences the mortgage market more than any other politician, and now we’re getting a new one.

Finance Minister Bill Morneau, who’s held that role since November 4, 2015, is out. He resigned today.

To say Morneau was pro-mortgage tightening is an understatement. The 57-year-old Liberal cabinet minister presided over numerous impactful changes to Canada’s mortgage market, including:

  • A new mortgage stress test on all insured mortgages
  • A new mortgage stress test on all uninsured mortgages at federally regulated lenders
  • Increasing the minimum down payment to 5% on the first $500,000 and 10% on the next $500,000
  • Eliminating default insurance for refinances, homes over $1 million, 30-year amortizations and single-family rental properties
  • Fee increases on mortgage securitization, which got passed on to consumers
  • Increases in capital requirements for banks and default insurers, which got passed on to consumers by way of higher insurance premiums
  • A higher RRSP Home Buyers’ Plan limit ($35,000 instead of $25,000)
  • The First Time Home Buyer Incentive
  • Temporary COVID-19 mortgage liquidity measures.

Some of these changes, like the uninsured stress test and capital requirement increases, were initiatives from federal agencies under his watch. Some he had direct purview over.

To his credit, in his final days, Morneau reportedly tried to fight for some degree of restraint on the government’s runaway COVID-related spending and $343 billion deficit. That may have caused part of his rift with the Prime Minister, say pundits.

There’s no word yet on who Trudeau will replace Morneau with. According to CBC, names bandied about include Chrystia Freeland, Jean-Yves Duclos, François-Philippe Champagne and even former Bank of Canada governor Mark Carney.

In terms of mortgage policy, we might not see much action for a while until a new Finance Minister settles in.

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  • Mark says:

    Good riddance. Maybe we’ll get a Finance Minister who can answer a simple question with a straight answer.

    I don’t expect Trudeau’s new drone to stand up to him. We’ll probably get more of the same free spending that’s destined to sink this country.

  • Broker says:

    I guess we can kiss fixing the benchmark rate goodbye, for this year anyhow.

  • Mike says:

    The grass should hopefully get greener next year. Three of the regulatory quartet will be gone as of January 1 – Morneau, Poloz and Siddall – leaving mainly Rudin to cheerlead demand side mortgage rules.

  • KC says:

    Looks like Chrystia Freeland got the nod. Smart cookie. Degrees from Harvard and Oxford and a Rhodes Scholar.

  • RangaN says:

    @KC: Degrees from Harvard and Oxford in Art History and Slovenian studies. Don’t seem even remotely relevant to her new job.

    • The Spy says:

      Hey RangaN, Just a guess but Slavonic Studies at Oxford is probably pretty rigorous. I’m thinking she has a lot of spare brain cells.

  • RangaN says:

    @ TheSpy: Pretty amazing getting a reply from you.

    Having said that, I wouldn’t let the best rocket scientist from NASA lead the surgery dept of my local hospital, no matter how good of a rocket scientist he is or how rigorous his training was.

  • WD says:

    In politics I’ll take smarts over any degree.

    Think about all the billionaires who never even finished school. Does that make them ill-suited to financial decision making?

    Steve Jobs
    Michael Dell
    Bill Gates
    Ted Turner
    Larry Ellison
    David Geffen
    John D. Rockefeller
    Henry Ford

    I don’t particularly like Freeland but I wouldn’t count her out because her Harvard and Oxford degrees aren’t good enough. Hell, our previous Finance Minister got his education in sociology and law. Paul Martin, who guided us to the biggest budget surplus in 70 years got his bachelors in history and philosophy.

  • RangaN says:

    Morneau has a Master’s of Science in Economics. Pretty poor replacement.

    Problem with school dropout billionaires is that they are the true unicorns. Not truly an apt comparison unless we are arguing if Freeland is in the same category of geniuses.

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