Canadian Government injects $75-Billion into the financial system. Lower interest rates ahead.

Great news for home buyers. This is a clipping from the Newsletter of the Montreal Real Estate Board. The government injecting money to maintain the market growing, although no news for the 40 year mortgage or zero percent down payment- and we all wish it remains that way. If you can’t afford to buy, then you should not get a mortgage. But for those with the means, lower interest rates are coming ahead. 

Federal Government’s $75-Billion Purchase of Insured Mortgages Should Benefit Home Buyers

As part of its efforts to address the current financial crisis, the federal government announced that it will inject $75 billion of new money* into the financial system, by buying insured mortgage pools from Canadian financial institutions.

The purpose of this measure is to add liquidity to financial institutions – money they can then lend to businesses and consumers. The main effect of such an initiative is to increase the availability of credit while, at the same time, making the cost of credit more affordable. As a result of this plan, financial institutions’ mortgage interest rates should drop, which is likely to stimulate activity on the resale market.

This announcement is good news for our financial system and for the economy in general. Ultimately, it is borrowers who will benefit from this initiative, particularly future home buyers.

This federal government intervention was made necessary by the fact that the financial crisis has led to a significant reduction in the amount of credit made available by the private sector and, as a result, higher costs. In this context, banks’ financing costs increase, which translates into higher prime rates and mortgage rates.

The purchase will be made through the Canada Mortgage and Housing Corporation (CMHC) and will focus exclusively on mortgages that are already insured under its mortgage loan insurance program.

*Minister of Finance, Jim Flaherty, made an initial announcement of $25 billion last October 10, and announced an additional $50 billion on November 12.

Posted by:  Deya Bautista - Affiliated Real Estate Agent working as part of the McGill Immobilier team. Specializing in condos and revenue property in the metropolitan area of Montreal. For buying or selling contact Deya at: 514.917.7889

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