TORONTO - Interest rates aren't going up any time soon, but when they do the rise will be rapid, mortgage industry experts say.
Because of this, mortgage lenders and brokers have a responsibility to help home buyers assess their capacity to make higher monthly payments, and to constantly evaluate their chances for default.
"There should be some prudence and there should be counselling by mortgage brokers to ensure people do leave a little wiggle room," Ivan Wahl, chairman and CEO of Xceed Mortgage Corp., said at an industry conference Monday in Toronto.
Wahl praised Canadian regulators for preventing the housing meltdown that has decimated the American economy, but said mortgage lenders have a responsibility to self-regulate as well.
"Regulators have a very specific role, but you can't regulate prudence," he said. "Self-discipline has to continue to be supplied."
The Canadian and American housing markets fared very differently during the recession. While the financial crisis in the U.S. was caused in large part by subprime mortgages, which led homeowners to default en masse when housing prices began to fall, strict regulations helped the Canadian economy avoid a similar meltdown.
However, even mortgage lenders weren't expecting the Canadian housing market to fare as well as it has.
"The last half of '09 is better than anybody expected," said John Webster, president and CEO of Scotia Mortgage Corp.
"We were looking at a nuclear winter . . .( for new mortgages), a 30 to 35 per cent drop, and that hasn't happened," agreed Stephen Smith, chairman and president of First National Financial.