As Lent begins today, we now have a different world for Mortgages and lending. This is a classic from 2010, when the new rules for mortgages started. I note these rules have not changed much.
The rules seem to be that you must meet the standards for a 5 year fixed term mortgage, even though you might be getting a variable rate mortgage. Rule 2 is the maximum you can refinance your home is now 90% down from 95%, and finally you’ll need a minimum of 20% down payment for your non-primary home, to make it harder to speculate on homes.
This set of rules may be a good thing, but I am kind of torn.
The bleeding heart liberal side of me thinks this is a great idea, stopping folks from getting in over their heads and then having to give up there homes when (note I say when not if)interest rates go up 3-4% this summer. The banks tend to try to get you to buy more house than you can afford normally, but with micro interest rates, this is a very dangerous thing, so I applaud Count Floyd (Jim Flaherty) the Finance Minister for bringing in these new rules (including an actual formula for figuring out whether someone can afford a mortgage, wow, not just a heuristic that no one will follow, an actual rule).
My Civil Libertarian side is worried about yet another Government intervention into our lives. In the immortal words of Pierre Elliot Trudeau:
“…there’s no place for the state in the bedrooms of the nation…”
Pierre Elliot Trudeau
Yes Mr. Trudeau was talking about Homosexuality laws at the time, but whenever a government agency comes up with yet another rule to help us live happy lives, I get worried. The business side of the argument is, that with more folks able to buy houses by having easier rules for getting mortgages, the market thrives and there is real value set for properties.
I think in the end this will be a good thing, but I am curious, dear reader, what your opinion of these rules are?
Remember Lent begins today too!
Earl Jones only 11 Years?
Earl Jones received an 11 year sentence for his shady financial dealings, defrauding over $50 Million. The down side of the sentence is that he could be out of prison Autumn of next year? Wow, that does not really seem to be a fair term, if that is the case. Spend a year in prison for a $50 Million fraud, and ruin countless retirements?
Well, as citizens come to rely on the government more and more referee in these matters, what do we really expect? If people won’t be responsible enough to say no to a mortgage they really cannot afford, what is to be done?
I don’t believe Flaherty has gone too far, infringing our civil liberties in the process. If all consumers were informed consumers, then they would be able to hold their own against Banks’ tactics to encourage them to overspend. (And they would ALL be reading this, and other financial blogs)
The sad reality is most people trust banks. And since the truth is that we can’t trust banks to do what is best for consumers, it’s just as well that Flaherty take these steps and protect the economy in the long term.
The true ill in our society is the belief that appearances matter more than how things really are. It’s okay if you are in debt up to the eyeballs, just so long as your house, car, clothes and toys etc. give the outward impression that you are doing as well, or better, than your neighbours. Not subscribing to that frame of mind is very liberating.
11 years? Not enough by half, but then, most penalties for sex crimes aren’t either, and those bother me a lot more.
BTW, The Cuckoo’s Egg was a very good read. Thanks. Any more like that you know of?
I have a diverse set of reading lists at the Ottawa Public Library, look them up:
Audio Books for Commuting
Friday Night Movies
Top Financial Books
Greatest Music EVer