We're Helping Average Canadians

The government recently released some changes to mortgages in Canada. The changes are to help the average Canadian and to prevent a housing bubble. For a government that believes in the free market it is interesting how they are willing to interfere in the market before there is truly any problem. I don't disagree with market interference but their method does seem a little strange.

To qualify for a mortgage now the borrower must be able to afford a five year fixed term mortgage which comes with a higher interest rate than the previously required three year term. The average effects of this assuming, an average mortgage of $337 000.00, is an increase in the monthly payments of about $200 dollars but to qualify for the loan at this higher rate translates into a requirement of an extra $10 000 yearly income. Hmm... that's easy. Just be rich and then you can buy a house. If you're not rich, well then, don't. Rent. If you can find a place to rent from but the government made that a little harder too.

It costs more now for investors and developers to buy property with the intent of renting rather than living in. This way only the rich can buy houses to live in and the super rich can buy the rental properties. It's an ingenious way to keep the rich rich and the poor subsidizing them. Good idea, Mr. Flaherty.

If we are worried about people not being able to pay the mortgage why don't we attack other types of debt that might be making it hard to afford a mortgage. Check out credit card rates. With an average of 19.5% and little to no requirement to receive a credit card the government could have gone a long way to reducing consumer debt by restricting credit card rates, especially as interest rates are at historic lows, and creating some solid requirements for getting a credit card. This would have had the undesirable effect of people not spending money, though.

If someone doesn't have their credit card they might not purchase that new toaster they couldn't afford and if someone doesn't purchase that toaster than the company won't make money and if the company doesn't make money then someone loses a job and has no money to buy stuff and uses a credit card instead. It's a vicious cycle. This doesn't happen if someone doesn't buy a house. They still spend money, either on rent or on stuff. Hopefully both without saving, that way they don't ever do something silly and invest in a house, everyone knows only the rich should do that.