Canada’s Minister of Finance [Dec 21, 2009] is concerned that homeowners are taking on too much debt and won’t be able to handle the higher payments that come with rising interest rates, or losses from falling home prices.  His response may be to increase the size of the minimum down payment of 5% to a higher number (?10%?) and decrease the amortization period from 35 (?to 30?) years, which would serve to increase the monthly payment.  Both would make it much harder for a first time buyer to enter the market and cool real estate prices that are overheating in some parts of the country.  Industry observers are very concerned that this is a knee-jerk response to a problem actually caused by record-low interest rates, lowered in the first place to stimulate the economy.

“My message to the government is to be careful not to overshoot,” he said. “You do not kill a fly with a hammer. Housing is a very important part of the economic recovery, which is still very fragile. You do not want to ruin that market.” – CIBC economist, Ben Tal

If 10/30 rules (%down/amortization period) take effect, “25% of buyers–these people that are buying with 5% down and those that are buying with 35-year amortizations, won’t be able to purchase anymore.” – CBC

10/30 mortgages would “be detrimental to the real estate market…First time buyers drive the housing market. Raising interest rates and reducing amortization periods will severely impact affordability for this important demographic group.” – BC’s MBABC

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