Great artice in BorrowBetter :
With so much focus on the attempts of Finance Minister Flaherty and Bank of Canada governor Mark Carney to manipulate lending policies and rates, the easiest way to slow the growth of personal homeowner debt has been ignored. Higher equity requirements (either as a downpayment on a purchase, or equity in a refinance) would immediately reduce a homeowner’s liability exposure and carrying costs, and correspondingly reduce banks’ loan loss exposure.
The concept is not without risk, of course, in that it could dramatically cool the real estate market – borrowers would qualify for less expensive homes, might put off purchases until they can save the higher downpayment, or have to delay renovations or construction because they don’t have room to refinance their property. A blanket increase (from a minimum 5% downpayment to 10%) may therefore be too extreme, but a tiered one based on home price or lender qualification would work far better than the current efforts around rate or policy manipulations
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