CMHC’s comments were initially confidential, sent in May 2014 through a memorandum.
"We are, however, concerned about reduced household flexibility resulting from elevated debt levels as well as diversion of capital into residential housing investments," the memo last year stated. "Likewise, elevated prices in some urban markets further compound affordability concerns."
Those prices have since continued to rise, with the average cost of a detached home in Toronto topping $1 million for the month of February. Average house prices in Vancouver hit that milestone last year.
This week, CMHC furnished Reuters a copy after the Blacklock's Reporter online website first reported it.
The memo also stated CMHC would “look at options for loan-level risk sharing with lenders to reduce risk, increase market discipline and further optimize taxpayer exposure.”
However, details of its proposals were censored.
From 2008 to 2012, Canada exerted efforts to tighten the rules around government-backed mortgages four times in a bid to cool the property market. However, the decline of oil values beginning in 2014 prompted a response from Finance Minister Joe Oliver who, late last year, said the government may take steps to rein in an overvalued housing market.
“In terms of household debt and the real-estate market, this is a subject, of course, we’re monitoring very carefully,” Oliver said, according to the Canadian Press. “So, we’re not going to take any dramatic steps in that regard, but we may take some moderate steps.”
And indeed it did, opting to lower the overnight rate to 0.75 per cent in January and holding it there at its latest announcement in March.
The Canada Mortgage and Housing Corp (CMHC) has admitted that it told the finance ministry in 2014 its concerns about increasing high household debt levels and rising prices in a number of urban property markets.