From the National Post –Federal government ready to deflate any housing bubble
Finance Minister Jim Flaherty speaks out on low interest rates and the hot real estate market.
“The reality is we have low mortgage rates . . . so we can expect some upward pressure on housing,” he said. “That’s OK, as long as it doesn’t become a bubble. We’re watching that.”
If necessary, the government is prepared to further tighten the conditions under which the Canada Mortgage Housing Corporation insures mortgages, the finance minister said.
“If we have to, we’ll do what we did last year and limit the rate of amortization further than we already did, and require higher down payments,”
While Flaherty may be threatening to shorten amortizations and require larger down payments to acquire financing, it appears more likely that he is simply trying to slow down the real estate market by talking about it, rather than actually following through. Flaherty has used this strategy in the past, trying to adjust public sentiment in order to reach a desired goal in lieu of changing fiscal policy.
In this case the threat to make mortgages harder to acquire may actually have a different effect than intended, pushing more people into the market, we have yet to see. If he does take this type of fiscal action however, could it possibly be the start of a market for fully qualified assumable mortgages with low cash to mortgage amounts and extended amortizations? Time will tell.
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