So long, 35 year mortgage with a 5% down payment? -

So long, 35 year mortgage with a 5% down payment?

Ottawa considers measures to cool off housing market


The days of taking of buying a house with next to no money down and spending the vast majority of one’s adult life paying it off may be coming to an end. Finance Minister Jim Flaherty is cracking down on Canadians that pile up debt when interest rates are low, only to find themselves in deep financial trouble when the rates rise again. Part of his strategy could include raising the minimum down payment on homes from its current level of 5 percent and scrapping 35-year mortgages altogether. Flaherty believes the measures would prevent people from accumulating more debt than they can handle. But some in the banking world are leery. “You could basically shut down 25 per cent of the market,” lamented CIBC economist Benjamin Tal. “It’s going to be significant because we’re talking about a lot of money that took advantage of those [low] rates.”

CBC News

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So long, 35 year mortgage with a 5% down payment?

  1. good so we will have even fewer people who have a stake in continuing this exploitative and predatory economic system who may feel compelled to change it. There is nothing natural about capitalism and it nurtures the worst aspects of human nature. Let's give real participatory democracy a try, I am tired of working with others only to see the government ignore what the majority of we the people want.

  2. This will definetly pop the housing bubble in BC. Bought time prices here are obscene. The poor banks will suffer and the people who paid rediculous prices for Vancouver area homes and condos.

  3. If only the Americans had taken this kind of prescient action a few years ago. We could have probably avoided this whole mess.

  4. I'm not sure how I feel about the government deciding how much debt I can handle. It seems like something that really isn't any of their business. If I get myself in over my head, I've got myself to blame. They should work to regulate Credit Card companies so they don't charge 22% interest per year and don't purposely target individuals who can't afford to pay. We need credit company regulation, not person regulation… and people need to re-learn self-regulation.

    • "I'm not sure how I feel about the government deciding how much debt I can handle. It seems like something that really isn't any of their business"
      "should work to regulate Credit Card companies so they don't charge 22% interest "

      So which is it? If you should hold yourself resonsible for getting into a mortgage that's more than you can handle, it logically follows that you should hold yourself resonsible for racking up debt on a credit card with 22%.

    • I would love it if people took responsibility for their actions – but as we have seen people don't do that – for example. all those people who invested in Jones Ponzi scheme are looking for someone to blame – anyone but themselves. They were quite happy when the money was rolling in and they were earning 10/15% without understanding anything about how it was being earned – but now are blaming the government for not regulating. I know many people who overbought on houses in the last 10 years and rather than looking at themselves, they are blaming the banks, their employers (who apparently are not paying them enough), blaming the city for high property taxes etc. etc. etc. But they will not take any responsibility for why a young couple of two NEEDED a 3,000 square foot house at a cost of $600,000 and a downpayment borrowed from their parents.

      So, when people actually take responsibility for their lives I will get angry at the government for regulating our lives.

  5. Government is not deciding how much debt you can handle but how much bad debt the financial system can handle. If you (and a million others like you) get yourself in over your head that is a problem for all of us. If you cant afford a 25 year mortgage at 6% with 25% down then you cant afford to buy the house. If you owe the bank 100,000$ and cant pay, you have a problem. If 1000000 people each owe the bank 100000$ and they cant pay then we are all in trouble. That is basically what the recent financial crisis in the US was all about.

  6. if people default on their loans that puts more houses on the market and then people can't sell …it is quite possible if the rates double or more which is very possible .. in addition the average canadian has several thousand dollats on their credit card paying around 20% interest ..and not saving for retirement…..they should consider teaching basic economics to canadians in the public school system

  7. What happen in the United States did not happen in Canada. We don't have the same problems. Why take someone else medicine? We have had 5% as a down payment for many years. If it works don't change it just because the next door neighbor went crazy. Only an idiot would take someone else's medicine

    • we do have a problem along the same lines in that people have borrowed too much money and the cost of borrowing is going to go up …which many people did not plan for …however in america it was more like predatory lending where they have clauses nobody read .. anyhow, in a place like vancouver if you have a $300 000 loan and pay 4% thats $12 000 a year interest but if you pay 6% thast $18 000 a year ..some people may not have that money ..and not only do you have to pay the interest you also have to pay down the principle

  8. It's not the banks which are on the hook for those who got in over their heads purchasing homes they will be unable to pay when interest rates rise. Just check out… We the tax payers will be on the hook due to our current government policies.

    "In 2007, after years of lobbying, the now defunct AIG found new hope with the newly elected Conservative government. AIG was now permitted to insure high risk Canadian mortgages. It was also permitted to issue mortgage backed securities and exchange these on the open market. At the same time, the Conservative government launched a radical policy that allowed CMHC, AIG & GE to insure 35 year ams and 0% down payments. A few months later this was expanded to 40 year amortizations. To be cont'd.

  9. Thanks to this stimulus in 2007 the market radically changed. Historically high home prices continued to gain steam. High risk borrowers flooded the real estate market. Throughout 2007, the average home buyer who took out a mortgage had only 6% equity in their homes. That's the national average downpayment for all mortgages including buyers who moved up.

    In 2008, Canadian home prices started to dip as affordability became the worst on record in many cities. CMHC admits that it was ordered to approve as many high risk borrowers as possible to prop up the housing market and keep credit flowing. 42% of all high risk applications were approved, a 33% increase over 2007"

    What happened in Canada is not really that much different than what happened in the US.

  10. Thats quite a steep transition. Taking mortgages often comes down to planning and a well sorted personal enconomy. The Home buyers plan indeed looks like a great option.salt lake mortgage