Former Finance Minister Joe Oliver thinks Ottawa has gone about pitching its new mortgage rules in the wrong way, but thinks tighter controls will enhance domestic financial stability.

In an interview on BNN, Oliver said the Liberal government would have been better served to tout that stability instead of selling the new rules as an avenue to enhance affordability in the nation’s hottest markets.

“I think they perhaps have marketed it in a somewhat disingenuous way by saying this is all about affordability and people who can’t now get mortgages that they could have before wonder how it’s become more affordable for them,” he said. “The real issue is financial stability, and of course we want to protect financial stability or we’re going to see a major crack in the market and a ripple effect to other areas of the economy.”

Oliver said the new rules could in fact erode the ability for younger, first-time buyers to get into the housing market.

“The end result will not necessarily be immediate increase in affordability: quite to the contrary, it’s going to mean that a lot of millennials who want to get mortgages will either have to get smaller mortgages with the down payments they have, or not get in to the market at all,” he said.  

Oliver said an outright drop in home price could benefit a small group of Canadians, but would have knock-on effects for both a larger group of homeowners and the economy at large.

“If prices go down, there could be some winners, but there could be some really terrible losers: those who just bought in the last year or so who are under water. If the real estate market were to crash, and I’m not predicting that at all, it has ripple effects on the economy,” he said. “The most dramatic way, of course, to reduce affordability is for people to lose their jobs, so [legislators] have got to tread very carefully, and I think the Department of Finance is well aware of that issue.”