A Liberal-appointed senator says Ottawa should stop trying to prop up struggling homeowners and let the housing market weed out those who can’t afford their mortgages.Blacklock's Reporter says Sen. Daryl Fridhandler, a corporate lawyer from Alberta, told the Senate banking committee that too much government intervention risks distorting the market. “I lived in Alberta in the early 1980s when interest rates were 17, 18, 20% and foreclosures were rampant,” said Fridhandler. “In fact that was a major, major thing. And yet I look today and the market has adjusted.”“It’s cyclical,” he continued. “So there’s only so much government intervention before you allow basic economics to take their course and clear out people who couldn’t afford what they bought.”“I am apologizing for being heartless on this,” Fridhandler added, “but how much government intervention do we expect we need to keep going to support an artificial platform?” .Officials from the Canada Mortgage and Housing Corporation did not respond to his comments.His remarks came as Canada’s banking regulator continues to warn lenders about growing mortgage risks. Superintendent of Financial Institutions Peter Routledge last year ordered banks to start monitoring borrowers at risk of default, noting that “high household debt, inflation and higher interest rates have led to real estate secured lending risks.”Routledge cautioned that many homeowners are already seeing higher monthly payments, while others will face “payment shock” when their mortgages renew.The last major housing crash in the 1980s led to widespread defaults and the collapse of the Canadian Commercial Bank and Northland Bank, both based in Alberta. .Between 1985 and 1987, another 36 mortgage and trust firms failed, leaving the Canada Deposit Insurance Corporation with a $1.25 billion deficit.According to a 2015 Finance Department memo, Alberta home prices fell 25% between 1981 and 1985, while unemployment hit 12%. The crisis was so severe that cabinet records from the era advised then–Prime Minister Pierre Trudeau to avoid big Western cities due to anti-government sentiment.“It might be advantageous to shift the emphasis of the government’s communications activity from large urban centres such as Calgary, Vancouver and Edmonton to smaller towns,” said one memo. “An attempt should be made to find audiences which were other than business-oriented since these tended to be anti-government.”
