Canada facing its own mortgage crisis

The news that the U.S. government has had to step in to help out IndMac, Freddie Mac and Fannie Mae, has sent a warning to Canada that they could be facing their own mortgage crisis.

Export Development Canada vice-president and chief economist, Peter Hall has said in a recent report that in addition to U.S. housing woes, housing starts were down 56 per cent year-over-year during May in the United Kingdom. They were down 18 per cent during the first quarter of the year in Spain and 18 per cent year-over-year in May in France.

Hall went on further that housing starts in Canada are now “soaring on the strength of the domestic economy and a huge dollop of very sell-timed fiscal stimulus.” He did warn however that, if their was a continuing excess of housing starts over requirements, then Canada’s turn could be next for a housing crisis.

This reports follows the Canadian government’s attempt to try and avoid a housing crisis, they did this by no longer insuring mortgages with less than 35-year amortization periods, as well as less than five-per-cent down payments.

Just after the Canadian government made these changes to mortgages, the United States Federal Reserve Board then changed their lending polices.

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