40 years Mortgage

Mortgage market enters 'uncharted waters': Scotiabank

Below is an abstract on a recent Financial Post article on 40 years mortgage and it's longterm implication to Canada's mortgage market. the

Liberalization of the Canadian mortgage-insurance market and the advent of 40-year amortizations are driving the housing market into "uncharted waters" with unknown risks, according to a Scotiabank report released Monday.

Longer-term amortizations now account for three-quarters of all monthly insured-mortgage applications, with the 40-year product accounting for half of that, the report said.

Click here to read the full report.

The excessive liquidity fueling the dot.com boom and burst in early 2000, was fueling the real estate boom the past 6 years. While the US housing market is now adjusting to declining demand, lower prices and mortgage defaults, the 40 years mortgage introduced by CMHC in 2006 fuels the housing market in Canada.

The program increase housing demand as first time home buyers enable existing home owners to trade-up. The program enables more new buyers who would otherwise not able to enter the market to become home owners. Longer term mortgages now account for three-quarter of all insured mortgages. But, if interest rates spike up, the the pool of new home buyers will shrink reducing demand for both new and resale homes.