Not a chance, the Canadian Mortgage and Housing Corporation is creating a Fannie Mae, Fannie Mac house disaster. This impending crisis should be front-page news.
Low interest rates and the government Canada Mortgage and Housing Corporation’s (CMHC) dramatic increase in mortgage backstopping for people who put only 5% down is creating a Canadian housing bubble that will echo that horrible popping sound of the USA housing market.
In January, CMHC was allowed to insure up to C$600-billion in mortgages, up from C$450 billion the year before. This was done in the dark days
Making housing affordable is a noble cause for any government or bank, however doing it by allowing for easy lending does not work at all and we see it in the US. All it does is let people borrow more ultimately as we are seeing right now, it is driving house prices skywards. It is a well meaning government program but it is distorting the markets. What it means for any tax paying Canadian is that housing risk is carried by the taxpayer here in Canada.
If you compare average salaries to average house prices it just doesn't add up, especially in bubble cities such as Vancouver. Clerks and baristas buying shoe box condos for over 300K is a disaster waiting to happen. In
The CMHC has disturbing similarities to Fannie Mae and Freddie Mac which helped set up the US housing bubble. The issues raised were solvency because of the ease of credit, market distortion as well as the fact that CMHC represents an indirect and increasing bailout to Canada’s profitable banks.
In the end, someone ‘always’ has to pay. Otherwise, the result will be similar to the
The CMHC is a sacred cow and it needs to be barbequed.
Jacoline Loewen, private equity expert, author of Money Magnet, panel of CBC show - Dollar Signs with Dianne Buckner on at 1:30 Saturdays.
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