Canada may require higher mortgage downpayments: report

http://ca.reuters.com/article/domesticNews/idCATRE5BK2FU20091221

I find this to be an interesting article. This is similar to what the government did last year with regards to requiring 5% downpayment and eliminating 40 year amortizations. At that time last year, although it made my job a little more difficult in terms of financing clients, I could understand why they did take those measures and I think things have worked out quite well in terms of stabilizing the Canadian real estate markets.

However, at this point I do not think that they need to tighten lending parameters any further. I also do not feel that it will that it will help decrease debt, and will only make it more difficult for CMHC to live up to its mandate of helping Canadians own their own homes.

Further, I believe that unsecured lending with credit cards and high interest loans such as HSBC Finance, Citi Financial and Wells Fargo, not to mention the payroll advance companies are a far greater threat to the debt levels of Canadians. If someone is paying 20-30% on a consistent basis for borrowing money, it is very difficult for them to ever pay that loan off in full. However, mortgage payments are a cost of living expense, since people have to pay rent if they do not own and do not wish to be homeless.

I think it could well be said that if these changes are made, that the Canadian government would only be serving to create a greater divide between rich and poor. Fewer Canadians could buy homes, fewer could start or continue to build equity or realize appreciation in value in their homes, and those few who are fortunate enough to have 1 or more rental properties would find it easier to strengthen and maintain their wealth.

I for one am hoping that we do not see this day, and that if the government wants to fight indebtedness, that they should start eyeing some of the tactics of unsecured lenders. However, this is not a substitute to having a population that is responsible and lives within their means. No government can regulate that.