Saturday, October 2, 2010

Adjustable Rate Quagmire

As an American who watched our domestic housing boom and bust with rapt attention, I nevertheless have a hard time wrapping my brain around the implications of every mortgage being adjustable rate, as in Canada. Sure, Canada has less of an issue with zero down mortgages. But a lot of the bust in the u.s. came from teaser rates coming home to roast on would-be homeowners. One of the most egregious problems during the boom was sleazy loan brokers sticking customers with disadvantageous mortgage terms when the customers well-qualified for better products.

Sure, Canada has low low interest rates, but that doesn't make it a great time to buy, unless you can lock that rate in and can calculate the total cost of ownership, for certain. For crying out loud, you have an entire country of buyers taking teaser rates that are going to burn them later, not just an unfortunate subset, like in the u.s. Yikes.

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