Watch What I Do, Not What I Say

Matt Chan • June 9, 2017

Is the government being reckless and irresponsible or will rates be this low forever? Here’s a great article that compares the recent changes to mortgage qualifications imposed on Canadians (what the government says) and the government’s own borrowing (what they are actually doing). Authored by Will Dunning, MPC Chief Economist. Enjoy!

“Watch What I Do, Not What I Say”

This is one of the most useful things I learned in high school. Thank you, Mr. Hall!

The federal government has clearly told us that mortgage borrowers need to be prepared for much higher interest rates in future, since the stress test for all insured mortgages requires that borrowers’ ability to pay must be tested at a rate that is more than two percentage points above the rates that can actually be obtained in the market today.

The “posted rate” that is used in the stress test is currently 4.64%; using any of the popular rate comparison websites, it is obvious that available rates are below 2% for variable and short-term mortgages, and below 2.5% for 5-year fixed rate mortgages.

Does the government really believe that there is a serious risk of rates rising by more than two percentage points?

It hasn’t discussed this. So, what can we infer from the way the government is actually behaving when it borrows money?

The federal government does a lot of borrowing: during the 12 months from May 2016 to April 2017 it sold just under $425 billion in bonds and treasury bills, or $35.4 billion per month.  Most of this is to replace issues that have matured, but about $25 billion represents new debt (growth in the total outstanding). By simple math, $400 billion per year ($33 billion per month) is for roll-over of maturing debt.

Given these enormous numbers, we can assume that the Government of Canada is aware that it is exposed to changes in interest rates and that its decisions about terms-to-maturity are based on a risk analysis. If it is concerned that interest rates will rise materially (or even if it is unsure, but sees a risk that they might), then its logical reaction would be to reduce its short term borrowing.

Fun Fact!

The government has not done that: to the contrary, it has SHORTENED the terms-to-maturity of its recent borrowing.

In the table below, data from the Bank of Canada is used to calculate the average terms-to-maturity for new Government of Canada bonds, by year.  (The data can be obtained via this page)

As shown, the lengths of new issues have fallen during the past decade.

For 2017:

  • The average term (fractionally above 4 years) is considerably shorter than in prior years, and is the lowest seen in two decades.
  • 60% have short terms (2 or 3 years). A further 26% have 5 year terms. Just 14% have long terms (10 or 30 years), and this is the lowest share in the 20 years of data.

The data in this table is for bonds, and excludes Treasury Bills (which have terms of 3 months, 6 months, or 1 year).  These short-term T-bills represent one-fifth of the federal government’s outstanding debt.  If they were included in the maturity calculation, the combined average maturity for federal debt issued in 2017 would be far below 4 years.

The data on the federal government’s actions send a very clear message that it either (1) does not expect rates to rise materially or (2) is being reckless and irresponsible. Meanwhile, it is imposing a draconian test on mortgage borrowers.

 

This article was originally published on Canadian Mortgage Trends, a publication of Mortgage Professionals Canada, authored by MPC Chief Economist Will Dunning on May 15th 2017. 

CONTACT

Share

RECENT POSTS

Bank of Canada Holds Rate at 2.25% — September 2, 2026

By Matthew Chan • September 2, 2026
The Bank of Canada announced today that it is holding its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%. While Canada's economic recovery is broadening, a new layer of uncertainty has entered the picture. Here is what happened and what it means for your mortgage.

How to Finance a Spousal Buyout After Separation or Divorce

By Matthew Chan • August 26, 2026
Mortgage Options During Divorce or Separation: What You Should Know If you’re going through—or considering—a divorce or separation, you may not realize that there are mortgage solutions specifically designed to help one party keep the home . For many people, the family home is their largest asset and where most of their equity is tied up. In situations like this, a spousal buyout program can allow one person to refinance the property and buy out the other party’s share—often up to 95% of the home’s value . This option can work whether you want to keep the home or your former partner does. What Is the Spousal Buyout Program? The spousal buyout program is a refinancing option that allows one owner to purchase the other owner’s share of the property as part of a separation or divorce settlement. In some cases, it can also be used to pay off jointly held debts, as outlined in a legal agreement. Below are some of the most common questions about how the program works. Is a finalized separation agreement required? Yes. Lenders require a signed and finalized separation agreement that clearly outlines how assets and debts are to be divided. This document is essential for approval. Can the funds be used for renovations or personal debts? No. Funds from a spousal buyout can only be used to: Buy out the other owner’s share of equity Pay off joint debts specifically listed in the separation agreement They cannot be used for renovations, personal loans, or unrelated expenses. How much equity can be accessed? The maximum amount available is the amount required to: Buy out the other party’s agreed-upon share of equity Pay off any joint debts listed in the agreement This amount cannot exceed 95% loan-to-value . What is the maximum loan-to-value allowed? The maximum loan-to-value is the lesser of : 95%, or The remaining mortgage balance plus the required buyout and joint debt payout The property must be the primary owner-occupied residence . Do all parties need to be on title? Yes. All individuals involved in the buyout must currently be registered on title. Your solicitor will confirm this through a title search. Does this only apply to married or common-law couples? No. While commonly used for married or common-law couples, the program may also apply to siblings or friends who jointly own a property and need one party to exit the mortgage. These cases are typically reviewed on an exception basis and require insurer approval. If no separation agreement exists, the purchase contract must clearly outline the buyout terms. Is a full appraisal required? Yes. A physical, on-site appraisal is required to confirm the property’s value before the mortgage can be finalized. Final Thoughts This overview covers some of the most common questions about mortgage options during separation or divorce, but every situation is different. Working with an independent mortgage professional gives you access to multiple lenders, specialized programs, and unbiased advice—so you can clearly understand your options and choose what’s best for your future. If you’re navigating a separation and need guidance around keeping or selling the home, feel free to connect anytime. All conversations are handled with discretion and confidentiality, and I’d be happy to walk you through your options.

How to Legally Assign a Construction Mortgage

By Matthew Chan • August 19, 2026
Why More Mortgage Options Matter—Especially for Assignment Purchases One of the biggest advantages of working with an independent mortgage professional is access to choice. Instead of being limited to one lender and one set of products, mortgage brokers work with multiple lenders—each with different guidelines, risk tolerances, and mortgage solutions. That flexibility becomes especially valuable when your situation doesn’t fit neatly into a “standard” box. A great example of this is purchasing new construction through an assignment contract . Why Assignment Purchases Can Be Challenging Assignment purchases are often viewed as higher risk by traditional lenders. Rather than declining these deals outright, many lenders quietly make them difficult by adding layers of conditions, restrictions, or uncertainty. This can lead to delays, frustration, or financing falling apart late in the process. The Good News There are lenders—available exclusively through the broker channel —that have clear, favourable policies for assignment purchases. With the right lender and proper planning, these transactions are absolutely doable. Typical Financing Requirements for Assignment Purchases While every situation is unique, many lenders that allow assignment financing look for the following: Standard purchase qualification, including income verification, credit, and down payment Assignments accepted at either the original purchase price or current market value Minimum 620 credit score , with no prior bankruptcies or consumer proposals The full down payment must come from the purchaser —seller incentives cannot be used Required Documentation To secure financing, lenders typically require: The original purchase agreement signed by all parties The MLS listing (if applicable) The assignment agreement signed by the builder, original purchaser, and new buyer Any side agreements outlining changes to the purchase price A full appraisal to confirm value This list isn’t exhaustive, but it highlights that while assignment purchases require more coordination, they are very achievable with the right lender and guidance. Final Thoughts Assignment contracts can open doors to great opportunities—but only if your financing supports the transaction. This is where access to multiple lenders and specialized policies makes a real difference. If you’re considering purchasing new construction through an assignment, or if you’d like to explore more traditional purchase options, feel free to connect anytime. I’d be happy to walk you through the mortgage products available and help you choose an option that doesn’t limit your financing possibilities.