Many Canadians taking on extended terms with no down payment at low variable rate. But what will happen when rates inevitably rise?

(Source: Globe and Mail)

“In the short term, these variable rates are pure gravy to borrowers. ”— Scotia Capital economist Derek Holt.

While home buyers have been pulling the housing industry out of a slump with their enthusiasm, there is growing concern that today’s price gains, fuelled by cheap money, may be setting the stage for a different sort of crisis two to five years from now when their mortgages reset at higher rates.

These homeowners could be forced to put their houses on the market and sell them for less than they paid, dragging down prices everywhere.

Read Steve Ladurantaye’s full article “New home buyers take risks with low mortgage rate” in the Globe and Mail (November 18, 2009).

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