Jim Flaherty has heard many opinions on his new mortgage rules. Those rules of course, will limit the amount a person can borrow through home equity loans and HELOCs and also reduces the amortization periods on government-insured mortgages from 30 years to 25. And while he’s listened and absorbed everything that everyone has to say, Flaherty is now telling us what he thinks.
During a conference call on Friday, Flaherty remarked on a TD report that stated the new mortgage rules could have a dampening effect on economic growth by about 0.2 per cent in 2013. Flaherty said that he hadn’t yet read the report, but he actually didn’t disagree. Yes, it could have a dampening effect. And that’s exactly what he wanted.
“I realize it may have some dampening effect on the economy,” Flaherty said during the phone call. “And I realize it may have some dampening effect in the residential real estate market. We are prepared to take that risk, quite frankly, because of the greater risk of the development over time of a housing bubble.”
Flaherty also said during that same phone call that he believes the new rules for borrowing against home equity will lessen the demand for these loans by about 5 per cent. And, he thinks that’s a good thing.
And as for taking on huge mortgages with little down payments, or just taking on a mortgage people can’t actually afford, Flaherty said that if the new rules force people to buy “less house or less condominium, quite frankly, that’s a good thing.”
Flaherty also said that while the new rules may cause a slight dampening, he also knows that the most recent data has shown that prices are still continuing to rise, on average, across the country.
“Money is cheap these days,” he ended his comments by saying. “Mortgage rates are low, the banks are lending money at low rates, and some people can’t resist that temptation. So we are making it more difficult to obtain insured mortgages at low monthly payments.”
And really, when all is said and done, it’s only those that don’t have enough cash to buy a home and need government mortgage insurance, that Flaherty is trying to stop. Not foreign investors, and not Canadians who can actually afford to buy a home. And, he stands behind his decision.
