Possible higher mortgage downpayments in Canada

December 21, 2009

Canadian money by Kevin Saff

If it seems like indebtedness of Canadians is starting to get too high, Canada might require people taking out mortgages to come up with a larger downpayment, Finance Minister Jim Flaherty announced on Sunday.

He also said that if "they" see some more evidence that there actually is excessive demand in the housing market or that there's an indication that people are taking on obligations that they will not be able to deal with properly in the future when interest rates rise, "they" will be obliged to take some action. The action to be taken in that case would be increasing the size of the downpayment from 5 percent to a higher number and reducing the amortization.

This seems like a reaction to and support of the words of the Governor on Bank of Canada, Mark Carney, from last week, when he advised Canadians to be responsible. The currently low interest rates might well increase and they won't be able to afford it if they take too much debt.

Way to scare Canadians, really. On one hand it is positive, yes - the Bank of Canada and the government do not want people to take on more than they are able to handle. On the other hand, though, people might get worried and just stop with mortgages. And that sure isn't what our government and the bank want, now is it?

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