VANCOUVER (NEWS1130) – There is more reaction to the BC government’s latest measure to address housing affordability, and not all of it is good.
This week, Premier Christy Clark revealed the government would match down-payments to first time home buyers to a maximum of $37,500 in the form of a 25 year loan that will be interest and payment free for the first five years.
Critics say this is your typical pre-election announcement, but warn these loans could have consequences down the road.
“We have households already in Canada with record personal debt loads,” explains Michael Prince, Professor of Social Policy at the University of Victoria.
“So, there’s a lot of assumptions here and a bit of a gamble. I’d say this is good politics, but risky housing policy, quite frankly.”
Prince says one assumption is that interest rates will remain where they are. He points out a rise in those rates could see a market adjustment.
“It could put extra pressure on people who may be tempted to come into the market because of this new program,” he explains.
“Down the road, if interest rates go up, there’s a possibility of risks being greater that some people may default on mortgages and get into financial trouble.”
Prince also notes the BC government is taking this step at the same time Ottawa is tightening up the rules around mortgages.