While the heads of the big six banks in Canada are urging Ottawa to put tougher restrictions on a person’s ability to get a home, the Bank of Canada is telling everyone not to worry, there is no housing bubble to speak of. The problem here is that only one of these groups can be right. If the heads of the banks are right and nothing is done, a housing crash will come later this year. However, if the Bank of Canada is right and nothing is done, the housing market will continue to improve and the economy right along with it.
So, who do we believe then?
According to Mark Carney of the Bank of Canada, it should be them. He recently said that there is no housing bubble and there is no need to change anything in the mortgage market. The heads of the banks want to have more money down on a home and shorter mortgage term lengths in order to weed out the people who may be spending beyond their means.
Speaking in Winnipeg, Carney said that the market is doing very well over the past decade and the strength of the system of mortgage insurance has been witnessed during this time. Carney also said that the increased strength of the housing market was completely expected and that the bank is looking at the market closely.
Regardless of how the housing market is doing, in June the Bank of Canada will be raising the .25 percent prime interest rate. When this happens, homeowners will find that they are paying much more for their mortgage each month and that may put too much strain on some people. If that happens, and if there are too many foreclosures, then there could be a mortgage meltdown like which was seen in the United States.
However, over the next few months the housing market will continue to improve and grow, with record increases over the previous year being seen. In Toronto, there has been double, and triple-digit, growth in the housing market since June and this will continue for a few months more. What happens after June is not known. Many think the housing market will slow, others think it will continue to grow, while some think that the market will collapse. All we can do now is prepare for the worst and hope for the best and wait to see what exactly is going to happen.
Posted: 2010-02-12 15:11:34
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