In 2010, Flaherty is again looking to
reduce the length of allowable amortization periods-this time from a
maximum of 35 years, down to 30. He is also considering increasing the
minimum down payment required from 5% to 10%.
Unlike our southern neighbours, the
Canadian real estate market saw a great deal of activity in 2009-much of
it due to low interest rates. With favourable rates and high activity,
there is concern that Canada is developing a housing bubble that will
inevitably burst. The government is trying to prevent this from
happening by cooling down the market.
During America's housing boom,
thousands of buyers got in over their heads by purchasing homes with
subprime mortgages and interest-only loans. As soon as interest rates
shifted, these homeowners could no longer afford to make their payments,
and their homes went into foreclosure.
The foreclosure epidemic has gone on to
affect the entire economy, with people losing their homes and jobs, and
people being unable to find affordable housing. This is something that
we'd definitely like to avoid in Canada, and perhaps making it tougher
for people to buy homes is one way to prevent it.
Though the proposed changes to the
mortgage rules will make it more difficult for people to buy real estate
(particularly for first time buyers), these changes are not designed to
punish anyone. The goal is to ensure that buyers entering the real
estate market can actually afford to do so. These rules are being
considered as a way of protecting individuals from going underwater, as
well as protecting our economy as a whole. We're fortunate as Canadians
because we can learn from the mistakes made in the States that
precipitated the foreclosure crisis.
