Posts Tagged ‘Credit crisis’
Canada’s Housing Bubble
I was reading the Financial Post the other day and came across an interesting article on Canada's housing bubble and how CMHC has contributed to our situation. Diane Francis brought up quite a few valid points. As a mortgage broker I see the benefits every day of CMHC insurance and how it allows homebuyers to purchase their home with as little as 5% down. However, the by-product of making housing more available to more people is it drives up home prices. If you ever took economics 101 in school you will know that increasing the demand for an item while keeping supply constant will result in increased prices. When you add our historically low interest rates to the mix.......well it could be a recipe for disaster. After all what contributed to the economic melt down in the US? You guessed it.....the availability of financing to people that probably should not have had it. In fairness CMHC does impose criteria far more strict than the US, but the basic principal is the same. Diane also brings up a good point concerning interest rates which I have actually wondered about myself. Why do banks charge a homebuyer with only 5% down the same interest ...
Credit Crisis Explained
Everyday we read the news and hear about another company going bankrupt or thousands more people losing their jobs. The financial markets are in turmoil and our retirement nest eggs are now worth half of what they were a year ago. What caused this global financial disaster? Why does the government have to bail out the largest financial institutions in the world with billions of tax payer dollars? Well, the answer isn't nearly as complicated as you might think. If you have 10 free minutes to watch this short animated video you will see how financial instruments developed by the banks called mortgage backed securities lead to our current financial meltdown. Keep in mind although this animation is based on the US's predicament, and is actually nowhere near as severe here in Canada. The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.
