One More Case for Longer-Term Mortgages: Financial Stability

Abstract

Longer-term mortgages would enhance both consumer choice and financial stability, but regulatory changes are needed to help them develop into a significant part of the Canadian residential mortgage market, says a new report from the C.D. Howe Institute.

In “One More Case for Longer-Term Mortgages: Financial Stability,” author Michael K. Feldman notes that according to the Bank of Canada only 2 percent of all Canadian mortgages issued in 2018 were fixed-rate loans with terms of longer than five years. He further suggests that encouraging 10-year or longer mortgages would increase options for borrowers while adding more stability to the housing market.

Keywords: Financial Services and Regulation; Financial Stability; Housing and Mortgages; Prudential Regulation

JEL Classification: G28; R21; R38