Tighter mortgage rules better than interest rate hikesThere's been a lot of talk lately about the Federal government tightening mortgage rules once again to protect the fragile economy – and the housing market – from a devastating dip. With Canadians over their heads in debt, this could be a more effective means of economic control than resorting to a series of interest rate hikes. In certain parts of the country – namely larger city centres like Vancouver and Toronto – the housing market is still climbing upward. While interest rate hikes would obviously curb this enthusiasm, they'd also make life difficult for anyone trying to get a loan – including small businesses, investors and students. It seems lowering the maximum amortization from 35 years to 30 years is one step experts are predicting the Federal government may take. Increasing the minimum down payment from 5% to a higher number is another step. While this isn't something responsible homeowners would enjoy, it may be what's needed to prevent other households from living beyond their means (and preventing banks from taking advantage of consumers' desire to do so). In the end, the government can only control so much. They can't decide who borrows money – but they can decide the terms and let the market sort itself out. When it loosened its grip in the 2000s, individuals who typically shouldn't have been able to acquire a mortgage did. While many played the game correctly, others didn't. Now it's up to the government to find that balance between a mortgage market that fosters homeownership and one that makes it accessible to the wrong people.    |
