A senior B.C. economist is warning the Lower Mainland's recovering real estate market and construction industry will both take a hit if Ottawa makes it harder for first-time home buyers to get mortgages.
Jim Flaherty, who said the government will "likely" boost the minimum down payment from the current five per cent and cut the maximum mortgage term down from 35 years to ward off a potential housing bubble in Canada
A higher down payment threshold would force many first-time buyers with insufficient cash to delay buying.
Shorter maximum terms could mean higher payments, trimming the price first-timers can afford to pay
A run-up in real estate activity is being fueled by extremely low interest rates that were slashed to encourage consumer spending and fight off the recession. Allowing many first time buyers to jump off the fence.
Flaherty's threat of tighter mortgage rules could actually spur more people to buy at the limit of what they can afford before new restrictions kick in.
Assuming they lock in at current rates, he said some of those buyers face "interest rate shock" three to five years from now when their mortgages roll over at what may be sharply higher rates
Greater Vancouver Home Builders' Association CEO Peter Simpson also opposes federal intervention.
"We're just starting to see some semblance of a recovery," he said. "We don't need to hinder that."
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