No housing bubble but possible tighter mortgage rules?

Last December, there was a report by CTV that the Federal Government was considering making some changes to mortgage rules if he saw evidence of a housing bubble.  These included increasing the minimum down payment from 5% to 10% and shortening maximum amortizations to 30 years from 35.

Today, the Globe and Mail reported Jim Flaherty, the Minister of Finance, has no plans to tighten Canadian Mortgage Rules.    He sees no evidence of a housing bubble.  The article goes on to say, the Big Six Banks have been putting some pressure on the Government to tighten mortgage rules.   Are you paying attention Mr. or Ms. Homeowner?  This could affect the value of your home.

Anything that makes is tougher for buyer’s to qualify for a mortgage will reduce housing sales and this ultimately will affect the value of real estate.  But probably the bigger and unwelcome effect is that it will make owning a home more difficult for first time homebuyers.

Let’s not forget that our government took action in October 2008 by reducing the maximum amortization to 35 years from 40.    They also abolished $0 money down and brought in a 5% minimum down payment. Is more action needed at this time?  I don’t think so…what troubles me a little is how the government and the Big Six banks are reportedly having secret meetings that concern mortgage rules.

Affordable housing is part of the Canadian dream.   The record low interest rates were brought in as part of the stimulus plan to help us get out of the recession.  We’re not completely out yet… let’s hope the government takes action that will help Canadians, not hinder their ability to own a home.

My suggestion to the government is to flex some muscle and get the banks to cap or standardize how they calculate prepayment penalties on residential mortgages.  We’ve seen far too many borrower’s with job troubles  that tried to benefit from the record interest rates, only to be hit with enormous prepayment penalties of $10,000, $15,000 and even $20,000.  Let’s help these Canadians.