With the Bank of Canada expected to keep interest rates on hold for several more months and household debt already at record highs, leading economist Craig Alexander says policy makers need to act soon to lower the risk of economic damage. More
The urging is coming from Craig Alexander, Senior Vice President & Chief Economist of the TD Bank Financial Group. He is suggesting four changes: reducing maximum mortgage amortization from 30 to 25 years; requiring mortgage approvals to be based on a 5.5% mortgage rate; requiring HELOC (Home Equity Line of Credit) approvals to be based on paying off the loan in 20 years; and, most significantly, increasing the minimum down payment from 5% to 7%. The idea is to slow down the housing market so that a bubble doesn’t form and cause serious damage to the economy. However, if measures like these are applied too quickly, they could cause exactly the problem they are trying to prevent. The housing market is a key driver of the economy, and all signs are pointing toward a gradual slowdown over the next year or so, without any need for government intervention. Let’s hope the government doesn’t follow Mr. Alexander’s advice!