Wednesday, February 17, 2010

Careful Now


I like the move our Government took today when they announced that they would be tightening up the qualifications for mortgages, especially for first time buyers. The buyer will now have to be able to show that they can sustain a 5 year mortgage at current rates as opposed to three years. Also the amount of equity a home owner will be able to withdraw from their home is decreasing. It is nice to see that someone is learning from the huge mistakes that were made south of the border. It is said that a large number of first time buyer are one paycheck away from being in default with their mortgage lender. It used to be three months.

So beware. This is a huge indicator that the government is more or less admitting that there is big time inflation in our near future. This is actually a no brainer because inflation always follows a recession and government deficit spending. And of course, inflation guarantees that the interest rates will go up. How nice for those with a big bank account when the interest rate rise, as opposed to those with debt. Unfortunately, most are on the debt side of the equation.

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