Remember a few weeks back that the Bank Of Canada would purchase mortgage securities worth $25 Billion from the crown owned and controlled CMHC (Canadian Mortgage and Housing Corporation)?
Well today it was announced that the Bank of Canada will increase the amount of mortgage securities to $75 Billion total to help the floundering Canadian housing market.
Although on paper this looks impressive, the fact is clear that CMHC who the government is purchasing the securities from is 100% crown backed, they are simply pushing around paper on balance sheets. The commercial banks should follow suit and lower there risk models and allow more cash flow into the would-be-homeowners.
The Government collects the funds to purchase the mortgages by issuing bonds with an average rate of return today at 2.7% and will buy the mortgages that should yield a return of 3.78%. It certainly would be nice to have access to the collective clout of the Government, sure would make your returns more impressive!
Here is the article from the Vancouver Sun
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