Caution urged on mortgage rules

CIBC senior economist Benjamin Tal said in an interview.

“The main risk here is overshooting, over-responding and basically shutting down or slowing down significantly the housing market, That is a risk they have to take into account, because the housing market is a major, major contributor to overall economic growth and we are still in a very fragile state of the recovery."

Let me translate this.

“The main risk here is overshooting, over-responding and basically shutting down or slowing down significantly the housing market and significantly reducing our government subsidies profit., That is a risk they have to take into account, because the housing market is a major, major contributor to our profit and we are still in a very fragile state of the recovery."

Basically, the banks know that this housing market will eventually bust because interest rates will not remain at these lows, and they want as many people to take out mortgages (mortgages that they will likely not be able to afford when rates go up) as long as the government insures them.

They know that if the government increases the down payment amount or reduces the amort period, then this bubble will burst, and this free money that the gov't has been gifting them will stop.

I will post soon about my position on banks commenting on housing reports, but my advise to everyone is to take it with a grain of salt, they want to give out as many mortgages to as many people as long as they have a government insuring them, and they want to extend it for as long as possible.

reportonbusiness.com: globeinvestor.com - Caution urged on mortgage rules