The housing market in Toronto and across Canada is doing amazingly well. In fact, the housing market is the reason that the economy grew by .2 percent last month. Thanks to the housing market, Canada is coming out of the recession sooner than most other countries. However, many federal experts are worried that the housing market [...]

The housing market in Toronto and across Canada is doing amazingly well. In fact, the housing market is the reason that the economy grew by .2 percent last month. Thanks to the housing market, Canada is coming out of the recession sooner than most other countries.

However, many federal experts are worried that the housing market is going to burst again because of the massive influx of buyers that are driving up prices and making selling a big investment across the country.

 In a recent report, finance minister Jim Flaherty stated that he was considering raising the minimum down payment needed to get a mortgage, and also reducing the maximum amortization period. He wants to do this in order to help put the brakes on a very hot real estate market.

 The federal government is justifiably worried about people taking on more than they can handle with a mortgage. In the United States, that careless home buying led to a massive meltdown of the entire mortgage market. Flaherty said that the government was worried that with excessive demand for homes, there are many people who are taking on an investment that they cannot afford in the future when interest rates rise.

 The government is expected to increase the size of the minimum down payment from five percent to higher, and reducing the amortization period from 35 years to a lower number of years.

 The main reason why the real estate market is so hot right now is because interest rates are at their lowest levels in history. The Bank of Canada has already stated that it will not be raising the interest rate until at least June of 2010, but that doesn’t mean some experts aren’t worried about what is going to happen after June of 2010. With interest rates higher, those home buyers who have variable interest rates will suddenly find themselves with higher payments each month. If they are already straining themselves to pay their mortgage, then they are going to be falling behind and that could create a credit meltdown if it happens to enough homeowners.

In a recent study by the Bank of Canada, one in 10 of all homeowners use 40 percent of their income to pay for home costs. If interest rates raise enough, that one in 10 will not be able to afford their mortgages anymore.


Posted: 2009-12-30 09:04:26

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