Give Flaherty credit on mortgage changes

I don’t think he has time to follow the blogs, but Finance Minister Jim Flaherty deserves credit for listening nonetheless.

Reducing the amortization periods for mortgages (see prior post “Canada’s housing bubble – time to take away the punch bowl” Dec 23-09), with a particular focus on disuading homebuyers from acquiring their home with a Homeowners Line of Credit (see prior post “Personal credit line balances up 61% since 2007” July 26-10), is music to my ears.

Although the editorial cartoon of the Toronto Star suggested that Canadians will now only be able to afford a house the size of a postcard, I beg to differ. Canada’s current home ownership levels in the 70s, 80s and 90s were largely built on 75% loan-to-value mortgages at 7 – 10% interest rates. To say that 80% LTV wth rates at 3.5% makes home ownership unaffordable is just plain dumb.

Let’s face it. The Minister probably thought these were the right steps to take last year, but delayed the announcement until the economic recovery had put down deeper roots. That, my friends, is how the job is done. And it likely bodes well for what is going on elsewhere in the economy.

MRM