Amid concerns about the sustainability of Canadian housing prices, the head of Bank of Nova Scotia says it's up to the banks to manage their mortgage lending properly, rather than expecting Ottawa to step in to cool the market.
"The current concerns about Canada's housing market are reason for caution but not pessimism," Bank of Nova Scotia chief executive officer Rick Waugh told the bank's annual meeting in Saskatoon on Tuesday. "We can and will manage through any potential problems."
However, as opinions vary across the banking sector about whether the government should tighten lending rules to limit borrowing and curb escalating household debt, Mr. Waugh said he believes the banks should manage this risk first themselves.
"I agree with our government," Mr. Waugh said. "It's up to the banks themselves – not government or regulators – to manage our risks and advise our customers appropriately.
"Likewise, it's the responsibility of government to set fiscal and monetary policies, and the level of interest rates, according to prevailing conditions. Each has an important role to play."
Ottawa stepped in a year ago to tighten mortgage rules, reducing the maximum duration of government-backed mortgages to 30 years from 35 years to rein in riskier lending and cool the market. While there has been debate among the banks and economists about whether the government should further reduce the maximum amortization on insured mortgages to 25 years, Ottawa has so far not shown an appetite to intervene further.
As concerns persist about soaring housing prices in some cities – in particular Toronto and Vancouver – fuelled by historic low interest rates that have encouraged borrowing, the federal Department of Finance says it is monitoring the situation.
With interest rates being kept low by the central bank to spur economic growth, the country's major chartered banks have been locked in a war over deeply discounted mortgages in recent months, trying to lure business away from their rivals.
Though some economists have speculated about a housing bubble forming in Canada as prices rise, Mr. Waugh said Scotiabank, Canada's third-largest lender, has not seen problems in its portfolio so far.
"Canadian household balance sheets remain solid, and our housing market is supported by strong fundamentals," he said. "Our customer delinquency rates are well within parameters."