Queen's University

Time to raise mortgage qualifications

2012-03-09

Queen’s University finance professor Louis Gagnon says the federal government should be raising its minimum requirements for mortgage loans in order to slow down the housing market.

Finance Minister Jim Flaherty has been consulting with the private sector ahead of the federal budget at the end of the month. Dr. Gagnon, a former senior manager at Royal Bank who specializes in risk management, wants the government to make it harder for people to acquire mortgages to prevent a housing bubble.

“Currently, the maximum amortization period is 30 years and the minimum down payment is 5 percent. In view of Canadians' record high and still increasing levels of indebtedness, as measured in terms personal disposable income, these should be reduced to 25 years and to 10 percent respectively – at a minimum – to soften the blow when interest rate levels do increase eventually. The federal government should also forge ahead with its plan to make it less costly for Canadians to pay down their fixed-rate mortgage debt faster,” says Dr. Gagnon.

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