TD CEO Warns Against ‘Knee-Jerk Reaction’ to Canada Housing Boom

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Toronto-Dominion Bank Chief Executive Officer Bharat Masrani cautioned against a rush to implement policies to slow the recent rapid gains in Canadian housing prices, arguing many factors fueling the surge are related to the pandemic and could abate as the crisis subsides.

The housing-price gains in many Canadian markets over the past year have been driven by buyers seeking more space for activities amid lengthy lockdowns, work-from-home policies that are allowing employees to move further from major cities, as well as government stimulus programs and a lack of spending opportunities that have some Canadians flush with cash, Masrani said. Similarly, the historically low interest rates that are lowering payments on larger mortgages were a response to the crisis and there are questions about how long they’ll endure, Masrani said.

TD CEO Warns Against ‘Knee-Jerk Reaction’ to Canada Housing Boom

While Canada has had a longer-term mismatch of housing supply and demand, policymakers should study how long many of the more recent drivers of the price gains will last before rushing into solutions for the market, Masrani said in an interview Wednesday.

“We shouldn’t have -- just because we see some stat here or there -- a knee-jerk reaction and say, ‘Oh my God, let’s go solve something,’” Masrani said. “There are tools that public-policy officials have already used before, and they have worked pretty well. So I am sure they are looking at that data into what is permanent what is not, and then I’m sure they will think of appropriate policy measures that have already been tried and proven.”

Toronto-Dominion is “very comfortable” with its underwriting standards and how it has been approving mortgages, and some may even consider the bank to be conservative in its risk management, Masrani said. The bank had about C$212.5 billion ($169.1 billion) in residential mortgages on the books of its Canadian retail segment at the end of its fiscal first quarter, up 6.2% from a year earlier.

“We do a lot of stress-testing on our portfolios,” Masrani said. “We feel comfortable that the position we’re in is appropriate and makes sense for the type of strategy that TD is running.”

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