Editor:
I am shocked and dismayed by the announcement of the B.C. government offering an interest-free loan to first-time homebuyers, reportedly budgeted at $700 million. What is most astonishing is the lack of awareness of this government to the growing chasm of wealth difference in our province, our country and the world, and this government’s contribution to it.
This government is showing little appreciation for the causes of the outrageous inflation of real estate properties, the main one being rock bottom interest rates with the side effect of growing massive personal debt.
The reasons that this political decision (is it a ploy to buy votes for the upcoming provincial election?) is economically ludicrous are as follows:
1. The benefit of these loans to the buyers is an effective reduction in their current loan interest rate, which undoubtedly will increase their debt load.
2. The maximum benefit applies to buyers that have $37,500 (for the down payment on a small condo in Vancouver) rolling around in their pockets, which suggests that they are fairly affluent (up to a maximum annual income of $150,000).
3. This loan will increase the number of eligible real estate buyers in the province, therefore increasing demand for existing housing and thus putting additional upward pressure on prices.
4. An increase in the Bank of Canada interest rate (almost sure to eventually follow the recent increase in the U.S.) will be reflected in mortgage interest rate increases and will place a further debt burden on mortgage-paying homeowners, if not outright foreclosures if the higher interest payments cannot be met.
5.
There is a crying need in this province for:
(a) affordable housing for the homeless.
(b) treatment facilities for the mentally ill.
(c) treatment facilities for those addicted to drugs.
It seems to me that $700 million would be much better spent on trying to alleviate the above problems (a), (b) and (c), rather than contributing to the problems of escalating housing prices and escalating household debt!
Gordon Catherwood, Gibsons
