It may soon be a lot harder to buy your first home, if federal Finance Minister Jim Flaherty has anything to say about it.
In an interview with CTV just before the Christmas holidays, Minister Flaherty mentioned that he’s considering raising minimum down payment requirements to “more than they are now.” He also said he was looking at decreasing amortization periods on mortgages to “something less.” In case we haven’t made ourselves clear enough, he wasn’t exactly forthcoming with specific numbers.
The Finance Minister is concerned about a possible real estate bubble burst. He worries that too many people could get into the market when interest rates are low, only to have the Bank of Canada raise interest rates later on this year, leaving many unable to pay their mortgages.
We understand why he’s worried. We can lay a great deal of blame for the 2009 financial crisis on a housing bubble in the United States. But there’s little evidence to suggest that could happen this year in Canada.
There’s a lot of experts who disagree with Minister Flaherty (more on that in later blog posts), but we want to devote this entry to explain why we think it’s a bad idea.
A significant number of our valued clients are first-time homebuyers who we want to support in purchasing their first home - a place where you can build your dreams and grow your family. Getting in is not easy for most. We know many of our clients can take a while to save up enough money for their down payment, usually because they have to pay rent to stay in their current place while they build up what they need to move into that special first home. Raising down payment requirements only puts more strain on potential first time homebuyers, who are so crucial for a healthy housing market. Here’s why:
First time homebuyers form the basis of a pyramid of sorts for the housing market. Eventually those who were first time homebuyers a few years ago need a bigger place to comfortably grow their family. Who are they going to sell to if those looking to buy their first home can’t get into the market anymore? Your guess is as good as ours. In this way, the effects of limiting first time homebuyers are felt all the way to the top of the market.
But it doesn’t stop there. Many businesses we work with, as well as our own, would take a serious hit as well. We work with many contractors, from those who renovate your kitchens to those who paint your house, who would feel the effects of Minister Flaherty’s proposed measures. Retailers would feel the pinch too, as fewer people would be buying the furniture and appliances that go into that first house.
We’ve got a lot more information to share with you on this topic, so bookmark us! In the meantime, we encourage you to write a letter to your MP if you want to speak out against these measures. Until next time!
Elke Babiuk and Michelle Larcher
MaxWell Canyon Creek Realtors
