Low interest rates have caused some Canadians to act "irrationally" in the housing market, potentially taking on too much debt that could lead to economic difficulties down the road, says the president and CEO of ING Direct Canada. "You have situations in some markets such as Toronto where people are making multiple offers for homes, they are paying thousands more and waiving conditions. It gives me concern they may not be thinking rationally, and this could lead to problems," Peter Aceto said in an interview Wednesday.
"Canadians are also paying their homes off slower and slower, and the concern for me is that they are buying more house than they can really afford." Aceto said he is so concerned about the market that he has instructed staff to advise customers not to go with longer-term amortizations if they can help it. More than 50 per cent of all mortgages in Canada this year were amortizations longer than the standard 25 years, says Aceto.
As a result, the lender said he is worried that some consumers are biting off more than they can chew. "It's almost as if Torontonians feel very concerned they are missing something with such low rates." said Aceto. "The problem is: can they afford to pay for their mortgage five years from now, when interest rates go back up?"
Sales of existing homes in the Toronto area were up 64 per cent in October from the same time last year, while average prices hit a record $423,559, up 20 per cent. Bidding wars have become common in choice neighbourhoods.
Posted: 2009-11-12 06:44:45
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