Have we learned nothing from our friends down South?
The exposure here is not the same. In the US you signed up at cheap rate initially (sub prime) but were faced with a huge increase "x" years down the road. The presumption was that your income and value of you house would go up. Your income would cover the increase and if it didnt you could sell and still cover the loan amount. That didnt happen...people lost jobs and the house values dropped. What made things worse is that the middle class, supposedly smarter dudes, also used the subprime rates to buy 2nd and 3rd houses to rent out. Remember that in the US you can deduct the interest on your 1st 2nd 3rd etc mortgages which further encourages people to grab more debt than they can afford.
I built new houses for many years back in the days with the Tories under Joe Clark were proposing mortgage interest deductibility. We supported in from an industry standpoint cus it meant money in our pockets but personally I knew that it wasn't needed. Our company researched showed that people will do anything to make their monthly payments and what they really needed was help on the downpayment. That 5 10 % becomes elusive when house prices go up 10% every year.
BMO's plan is very low risk for them...at the end of 5 years the purchaser is free to go whereever...if he did bail on the monthly payments well BMO has the house to sell....and probably at a very tidy profit due to increased values.
Every sane US politician and even those in the GOP would love to eliminate the interest deductibility especially on 2nd and 3rd homes. It is recognized that in those cases it truly does pander to the rich. Reagan tried to eliminate it on sailboats and yachts and got clobbered and it was re-instated. The US will never be able to get rid of it....it would be similar to Harper saying "cancel all medicare". Someone would shoot him.
