October 4, 2010
While the media hype about the potential for an impending bubble has quieted down in recent weeks, the federal government has internalized Mark Carney’s warning that historically low interest rates, while necessary to reach inflation targets, are troublesome in other regards.
A spokesperson for the Finance Minister says that toughening mortgage rules is not on the federal agenda, but according to the Financial Post:
…Craig Alexander, chief economist with TD Bank Financial Group, said while he hasn’t heard specific talk about changes to mortgage rules, he could see it happening if the market heated up again.
So what’s worrying them really? Basically, people are worried because debt is 146% of personal disposable income. And that number has been growing. Question is– will it keep growing?
Probably not. The housing market appears to be slowing on its own. I mean, sales are down 20% from a year ago. That sounds like an automatic market correction to me.
Bottom line is: changing mortgage rules could send the housing market crashing down (and unnecessarily no). It could create the crazy price declines that economists are predicting. Just another example of the market creating a self-fulfilling prophecy.