Hon. Robert H. Winters (Minister of Public
Works): Mr. Speaker, I should like to inform hon. members of the decision to increase the maximum interest rate on insured loans under part I of the National Housing Act from 5J per cent to 6 per cent. A similar increase of one-half of 1 per cent will take place with respect to the rates applicable to other types of loans under the act.
The statute authorizes the governor in council to fix the maximum rate of interest that may be charged for various types of loans. In respect of insured mortgage loans, the interest rate cannot exceed the yield on long-term government securities, plus 2J per cent as of the time the rate is fixed.
The National Housing Act maximum rate was increased from 5| per cent to 5] per cent in March last year. During 1956, and particularly in the later months, the large capital investment program has increased the competition for investable funds and general interest rates have risen. In face of this exceedingly great demand for funds, the flow of mortgage moneys to housing particularly under the National Housing Act has diminished in the last quarter of 1956 and the rate of house building has reflected this. The program for the year 1956 was nevertheless impressive. There was a new record of 135,000 completions. More than 125,000 homes were started and there were 70,000 houses under construction on January 1, 1957.
The present increase in the National Housing Act interest rate is designed to place would-be borrowers under the act in a better position to compete for a fair share of available mortgage funds in the year ahead.
The new rates will have application to all undertakings to insure that will be issued by Central Mortgage and Housing Corporation on and after tomorrow, January 22, 1957.