“We do have very low interest rates, and we have given extraordinary forward guidance,” Tiff Macklem, the current Bank of Canada governor, said in an exclusive year-end interview on Dec. 16. “That’s partly how monetary policy works. It stimulates, lowers the cost of credit, so you’re probably going to see more spending on things that people use credit for. Housing would be high on that list.”
Politicians were the only ones who had the power to restrict mortgage lending, and they were loath to give it up to the central bank.
I once heard Morneau tell an audience in Montreal that voters were counting on him, as finance minister, to “ensure their home keeps its value.” Politicians will always need an extra incentive to approve something that might make it harder for us to buy property. During the first experiment with low-for-long interest rates, that usually meant overwhelming evidence that the country was on the verge of a housing meltdown.