Mortgage-backed securities in Canada: the size of the market and prospects for the future

Abstract

Mortgage-backed securities (MBS) were introduced into the Canadian financial system in 1987. This paper describes their development and history, and compares these with the situation in other countries, through a brief review of mortgage securitisation in various parts of the world (the UK, Australia and Japan). The primary uses of MBS in Canada and positive aspects of securitisation are explored, both as they have been experienced since the inception of MBS in the late 1980s and as they relate to the basic structure of the mortgage finance system in place before MBS were introduced. The paper also contrasts the MBS markets in the USA and Canada. The proportion of national mortgage debt that is packaged into MBS in both countries is examined, and the paper discusses reasons for the significantly smaller proportion of debt in Canadian MBS versus the numbers for the USA. Future prospects for growth in the Canadian MBS market are explored. Copyright © 2005 Henry Stewart Publications