Mr Flaherty, Please Save Us From Ourselves

Out of concern for us, yes, you (we, us) woeful and pitiful Canadians, the Conservative government will be tightening mortgage rules, effective April 19th.

Am I dreaming? Is this not the government that promised the foolish people who voted for them we would get a smaller government, a reformed Senate and less government interference in our lives?

I would be even more pissed if I voted for them.

What did Flaherty reveal to us on Tuesday?

Let’s boil it down to the essentials.

Borrowers will have to qualify for a five-year fixed mortgage- even if they want a variable rate mortgage.

The maximum amount that can be withdrawn when borrowers refinance mortgages will now top out at 90% of the value of the home, down 5%.

A minimum 20% down payment will be required for insured mortgages tied to properties purchased as “speculative housing” investments not occupied by the owner.

My issue is not really with the substance of the changes but with the arrogance of the Conservatives in proclaiming the need for the changes itself.

Is this the best use of the “break” they have given themselves? Shouldn’t they be watching the Olympics working on the budget?

And why do I need to be treated like an infant? Am I not old enough to decide how best to spend (or not spend) my money?

If people get in over their heads, should they not have to deal with the consequences? I am not saying they should be thrown to the wolves (necessarily) but if they need their hands held on this, what else will they need? And will the government benevolently step in then as well?

If people are that financially illiterate, wouldn’t it make more sense to teach them how to manage their finances? There should be mandatory courses in basic financial literacy in school and instead of laying down the law, also give adults the opportunity learn how to figure out their own best course of action. We are the ones who care about our money and our financial futures the most, not your neighbour, not the bank and certainly not the government.

But let’s step back from the idea of personal responsibility for one second….

Some banks applauded this move to save Canadians from themselves. Is it not the banks who should be setting the criteria for borrowing? They are, after all, big corporations who have to worry about the bottom line and make money for their shareholders.

Yes, there are restrictions to prevent the kind of meltdown of financial institutions in the States but where does one draw the line?

Though Flaherty was very careful to say Canada was not experiencing a bubble, this may actually push anyone who was on the fence about buying or not buying before. The intended outcome, at least in the short run, may be the exact opposite.

The economy is still in a tenuous position and my worry is that moves like this could bring the recovery to a standstill. There are a few factors driving the current real estate market that will change soon (historically low interest rates that cannot be sustained, the HST coming into effect in Ontario July 1) and when these happen, the real estate market will slow down- fast.

It won’t be a burst, more a fizzle, but we are due for a correction. Housing is cyclical and we have been on an uptick for about 16 years now.

It will be downhill from here (for a while) and anyone who tells you differently, is lying to you.

There is nothing you can do about the state of the economy or the housing market or the price of tea in China.

All you can do is make the best decision for yourself and whether I use my house as an ATM or not is my business, not the governments.


~ by angryegg on February 18, 2010.

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