IMF Suggests Limitations On How Much Debt Canadians Can Take
OTTAWA – Due to the possible ramifications in the housing enterprise market, the International Monetary Fund is issuing a caution due to the fact of the risk this might have on the Canadian economy and is urging and encouraging the government to work nonstop in trying to protect the economy from possible risk factors.
In its annual review of the Canadian economy, the IMF stated that consideration should be taken before further tightening of tax based and macroprudential measures to mitigate investment and speculative activities. Greater co-ordination was also called for between provincial and federal regulators as well as the efforts made by the government to obtain more inclusive data on transactions done in the real estate empire.
The areas of concern which are being pointed to for the Canadian economy are the high levels of household debt and the housing market.
In recent years Ottawa has moved a good number of times to tighten the mortgage lending rules which also includes expanded stress tests on mortgages. In Vancouver last summer a 15 per cent foreign buyer tax was implemented while plans for a similar levy were announced in Ontario for the Greater Toronto Area.
Canada’s six big banks were recently downgraded by Moody’s Investors Service due to concerns about being left vulnerable because of housing prices and consumer debt.
Household debt to be capped?
IMF’s mission chief for Canada, Cheng Hoon Lim, said there are some policies that could alleviate fears of rising debt burdens and could also help stop speculation in the housing market. She said, “Among these measures, a cap on household debt to income or more stringent qualification criteria for household debt above a certain threshold will go directly to addressing household indebtedness.”
Ontario and British Columbia were also encouraged by the IMF to replace their foreign buyer taxes. The statement said, “This could include a combination of prudential and tax based measures that discourage speculative activity without discriminating between residents and non-residents.”
