Recently, the Bank of Canada Governor Mark Carney warned Canadians about a potential housing bubble that could burst in the wake of rising interest rates. A COMPAS Inc. poll revealed that though Canadian CEOs agree higher down payments would help homeowners better manage debt, they are less worried about household debt than they were last year.
On a 7-point scale, where 7 means well-founded and 1 the opposite, CEOs rated Carney’s concern about a housing bubble a 4.9, compared with 5.7 last year. ‘Canadian housing prices did not rise nearly as much as in the U.S., therefore there is much less risk of a bubble,’ said one CEO. ‘To prevent one from starting, increase the qualification requirements and down payments and reduce the amortization.’
Present mortgage regulations require a 5% down payment and a maximum amortization period of 35 years. CEOs were asked whether they thought this should be changed to a 10% down payment and 25-year amortization period. They gave the idea a score of 5.3 on a 7-point scale, with 7 meaning strongly agree and 1 meaning strongly disagree. Though CEOs weren’t overly concerned about the housing bubble, they did think it wise for the government to put measures in place so Canadians don’t follow in the footsteps of our southern neighbours.
‘The Bank’s warning should be heeded,’ said one exec. ‘Canadians should be wary of following the lead of our American cousins by living on credit. We should know better, having just seen the effects of a worldwide financial meltdown.’