Saturday, July 15, 2006

Housing matters

The Canadian Mortgage and Housing Corp. (CMHC) announced a new program that allows homeowners to have an interest-only mortgage insured with no down payment.

The news from CMHC comes at a time when some economists say Canadians are apparently already not saving enough (notably young families). Add to this what we know from history: housing wealth reduces saving by more than other kinds of financial wealth.

Also, from what we already know, low long-term interest rates and easily accessible housing means people tend to stop saving from their current income. We've seen a strong case of this in the U.S. (although the situation appears to be cooling).

After the CMHC announcement David Dodge expressed his concerns of spiraling inflation. CMHC offers assurance that the new program will not change the qualifying criteria for a mortgage.

Whether the qualifying criteria is changed or not, attractive deals have a strange knack for spurring demand. Go figure.

Something I enjoyed reading: Mark Thoma noted some advice given to the Fed by Robert Reich as the U.S. housing boom appeared to begin its slow-down.

1 comment:

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