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February 10, 2022

Could new mortgage rules pop housing bubble?

Cheap mortgage conditions are encouraging more and more Canadians to jump into home ownership. In fact, the current national rate of 68 per cent stands close to a 40-year high and is actually higher than in the United States.

But the good times can’t continue, say some observers, particularly since so many home buyers are opting for short-term, variable-rate mortgages, which will eventually ratchet up, potentially leaving many owners offside. 

Fears of a U.S.-style housing bubble have prompted some of Canada’s banks to ask the government to calm the market by tightening mortgage rules, making it just a little harder for shaky buyers to get themselves into trouble.
There’s been talk of increasing the minimum down payment on homes to at least 10 per cent – up from the existing 5 per cent and reducing the maximum amortization period to 30 years from 35.

But at least one banker thinks this would be a really bad idea.

Peter Aceto, the head of ING Direct Canada, sees such drastic changes as precipitating the very bubble they’re supposed to prevent. 

“The banks in this country don't have to lend to the limit of the law – they can make smart rules on their own and not have Minister Flaherty make the decision for them,” Aceto told the Globe and Mail.

Are we in the midst of a housing bubble? Would such changes prompt you to do anything different?

By Gordon Powers, MSN Money



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...