CMHC bubble is 100% made in Canada

October 22, 2009

Below is a timely article by Financial Post columnist, Diane Francis,  published on Thursday, October 22, 2009.

Ottawa has been creating a housing bubble in Canada with taxpayer money, which is why residential real estate prices rise in defiance of high unemployment and recession.

Ottawa’s low interest rate policy and Crown agency Canada Mortgage and Housing Corporation’s dramatic increase in mortgage backstopping, for people who put only 5% down, have pushed up activity and prices.

Read the full article here.

“CMHC’s policies distorts the market. It allows banks to lend recklessly without consequences and pushes up the price of housing for everyone. It rewards those willing to speculate with leverage and discriminates against those who are prudent”.

untitled-1-copy.jpgThe distortion in home prices as a result of CMHC’s gaurantee on excessively leverage purchases and extended amortization from 25 to 35 years, have resulted in great risk of loan defaults if and when the housing market takes a hit.

The above problem was highlighted by an article Murray Dubbin wrote and published by The Tyee “Why Canada’s Housing Bubble Will Burst”

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