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Wednesday, April 24th, 2024

Should Mortgage Financing be Privatized? – Ask a Vancouver Mortgage Broker

Should Mortgage Financing be Privatized?


You can bet that question just got the attention of anyVancouvermortgage broker who happens to be checking out this site.


Nonetheless, it’s a debate that’s being kicked around out there and maybe one you might want to have a closer look at. You’re probably asking why anyone would want to even raise such an inane issue at all.


Well, the reality is that there are a lot people who are suggesting we might be on or near the verge of entering into that real estate bubble zone which might be just starting to get a little too tight at the seams. Every broker inCanadajust has to still be shuddering at what happened to our southern neighbours in theU.S.


If you look at it from the perspective of burgeoning house prices, and the debt ratio of not only the average home owner, but also perspective buyer, some of the decision makers out there are getting a bit antsy.


The big fear is that since the CMHC, which is government supported, is heavily vested with all those home buyers who don’t have the that coveted 20% to put down as a down payment. Those that don’t have that amount make up over 60% of home buyers. What would happen if a big percentage of these folks ended up defaulting?


The answer is pretty simple because it’s going to come out of the pocket of the average taxpayer. That’s not a good thing.


The question becomes what might the politicians do? What if they did regulate a much higher down payment and/or pulled back from their guarantees on mortgages?


You don’t really need a crystal ball to guess some of the outcome. For one thing, a lot of potential homebuyers will no longer be in the game so that’s going to knock out the socks in home prices.


Lower prices might be good news for those who can still afford to buy, but bad news for those who are top heavy in their home investment. A lot more mortgage defaults would also likely soon follow in its wake.


The economy would get whacked badly as well because close to 1/5 of the entire Canadian economy relates to the housing industry. There would be an incredible amount of construction workers out on the dole because no one would be building anymore. Any business which is related to home improvement would also take a mean hit as well.


An awful lot of people have used their home as a potential retirement vehicle, and if prices dropped dramatically, their retirement hopes could be dashed to pieces in the process.


Apartment owners and landlords would be rubbing their hands with glee because rents would sore. This is especially true when you consider just how tight some of the vacancy rates have become in the larger metropolises.


Mortgage rates would be sure to rise if the government backed off their mortgage backing as the confidence of lenders would plummet.


It’s hard to say what the future holds for the housing market. Nobody wants to go through what our southern neighbours went through, but any regulations which are too Draconian on the other side of the coin aren’t going to be any better. Let’s hope for a measured approach and that cooler heads prevail.





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