Recently we have had two different lenders come up with “cut-rate” Mortgage (BMO and Manulife) “deals” and both have now withdrawn those “deals” after urging from the Government (specifically the Department of Finance (and in the case of Manulife the Finance Minister himself)).
The direct quotes (from the CBC web site) from those involved were:
“My expectation is that banks will engage in prudent lending — not the type of ‘race to the bottom’ practices that led to a mortgage crisis in the United States,” Finance Minister Jim Flaherty said of BMO’s “cut rate” mortgage deal.
and a further quote from the finance minister:
“I had one of my staff call them and indicate my displeasure, which is the same thing I did with BMO, except I called myself,” the finance minister said.
So there you have it my fellow Canadians, evidently there is now plenty of room for the government in our bedrooms (and homes) (to paraphrase Pierre Trudeau).
Now I could not find enough information on what kind of “deal” both BMO and Manulife were offering for these alleged 5 year mortgages, however offering rates of 2.99% and then 2.79% makes these sound like great deals (however, I am willing to hear from folks who are better informed on the entire deal on whether over payments were possible, and whether there might have been hidden penalties as well), but that is not the real point, it is the fact that the “Harper Government” now feels that market forces cannot be trusted.
Have they overstepped their bounds? No, both of the firms could have said, “Sod off!” (however imprudent that might have been), this was not an act of parliament, but it does open an interesting discussion about How Big a Nurse Maid Must the Government Be?
Would there have been a run on “cut-rate” mortgages? There might have been, can you trust banks to not cut their own throats? Rhetorical question now, I suppose, but currently I am fairly certain that I could walk into my bank and after a lot of threatening to leave, I might get a fixed rate of somewhere near 3.5% (without too much work, maybe even lower, who knows). Would we end up with a Bunch of Stupid Mortgages causing a US-like Sub-prime debacle? Guess we shall never know.
Does the government think Canadians are Financially Stupid? Actions speak louder than words in this case.
Also, I find it hilarious to then hear Tom Mulcair (I am a former Quebecois so that is what we call him there) complaining about the Conservatives interfering with the free market, the irony of hearing a staunch Socialist complaining that the Free Market should decide is not lost on me.
No word on the heir apparent for the Liberals (Mini Trudeau) about whether the Government should be stepping in here.
What do you folks think? Should the government stopped this foolishness or let the marketplace decide?