YOUR MONEY

 

CANADA GOES RUDDERLESS

 

The sudden resignation by Jim Flaherty as Finance Minister --  for health and family reasons – earlier this March is already proving  disastrous for the financial future of the county within days.

Mr.  Flaherty took steps to try and prevent a housing bubble bust as years of super low bank rates, mortgage terms as long as 40 years and a Canadian Mortgage and Housing Insurance program that had lowered the bar to 5% down payment or the equivalent amount  in home-of-the-handyman renovations.

This loose money insanity has pumped the housing and condo market sale prices to astronomical levels and burdened young buyers and second time buyers  with horrendous debt.

When interest rates are to return to more normal, historic levels of over 5% prime, massive foreclosures and bankruptcy could well ensue and  hundreds of thousands of families face eviction and ruin.

Mr. Flaherty,  therefore, single handedly tightened the rules on all 3 fronts  - gradually.

However, his new replacement, Joe Oliver, has within days of taking office begun to undo Mr. Flaherty’s prudent efforts.

 As reported in the media, Mr. Oliver has told the Bank of Montreal – and any bank that gets a newspaper or listens to the radio --  that he is comfortable with 5 year mortgage rates dropping by ½% to 2.99% from 3.49%.

 
Mr. Flaherty had blocked such a move and a discount price war last year,  but our new finance minister is now on record as saying he will stay out of the housing market and let business run free.

This laissez faire approach is not wise and will soon make the housing bubble bigger and the inevitable ‘burst’ bigger, more painful, more widespread and last far longer.

The USA has taken 8 years (since 2006) to even get close to recover!  

Our smaller economy - where home construction has jumped to some  7% of the economy  --will be in far worse shape.

Thank you Mr Oliver for your lack of vision and cow towing to your banker friends.