Low rates should come with warning, experts say

Low rates should come with warning, experts say

Cheap mortgages and the explosive resale housing market have been stirring fears of a housing bubble among economists and real estate experts.

"Our concern is that the majority of new buyers are going with floating rates and setting themselves up for gradual and material rate resets over the next two years," Scotia Capital economist Derek Holt told the Globe and Mail. "Buyers need to think about where their rates could end up and whether they would be able to make those payments down the road."

Aside from the inevitability of rising mortgage rates, experts are also concerned about the dramatic climb in house prices this year, particularly in cities. If homeowners are forced to sell down the road due to rising mortgage payments, the Globe points to fears of prices being dragged down, echoing what happened last year. Despite the concerns - which were also echoed by ING's Peter Aceto two weeks ago - CAAMP CEO Jim Murphy told the Globe Canada is far from a U.S.-style housing crisis.

"The overwhelming majority of Canadians still have predictable fixed [rate] mortgages and a fair bit of skin in the game," he said. "In the U.S., people had no equity, or could get loans without jobs. We don't have that kind of volatility here."


  • Clayton B. Carby AMP 2009-11-21 3:46:31 AM
    Yes it is true that if the variable rates go up, and they will, over the next few years people will find their payments go up as well. As an Accredited Mortgage Professional it is my responsibility to ensure I do not put a client into a position of future failure. I think the financial Institutions also do this with the qualifying guidelines they have. This is not the US and we do things way more conservative here.
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