International Real Estate Digest ‘Canadian analyst’ Simeon Mitropolski plainly and simply predicted the effects of longer amortization terms on Canadian RE prices in an article at IRED 18 Aug 2006. [Hat-tip to ‘Best place on meth’, at vancouvercondo.info , who’s handle still doesn’t fail to raise a smile.]
Why did the government loosen mortgage criteria when it was clear that the move would simply increase prices and not help true affordability in any meaningful fashion? Could it be that they were driven by a desire for short term political benefits for themselves, and to help out vested interests, rather than out of a desire for sensible long term policy concerning housing and household debt ?
Shouldn’t we all feel like idiots for supporting a system of government that rewards short term squandering over longer term wisdom? -vreaa
“CMHC announced new measures making mortgage loans in Canada more accessible for would-be buyers with moderate incomes. These measures include among the other things offering loan insurance on extended mortgage loan amortization periods up to 35 years, instead of 30-year maximum in force between March and June 2006. … In February 2006 in a 4-month pilot project the maximum amortization period was extended from 25 to 30 years. The last decision makes this pilot project ongoing and extends additionally the amortization period to 35 years.”
“The consequences of this new policy fall into two categories, intended and unintended. Intended consequences are to make some hesitant Canadians go and buy housing despite the rising prices and the rising interest rates. … Unintended consequence of this rising demand will be that the real estate market in Canada will go up, thus making the affordability slip again after a brief period of relative mortgage relief.”