Population and Housing

[tomh009]

To bring this thread back to housing, I wondered what would happen to the housing market if:
1. All existing mortgages were canceled immediately and houses valued at whatever had been paid for in the mortgage to date.
2. All housing would be price restricted and only sellable for the equivalent of what the owners had paid for it in the first place, perhaps indexed to inflation.

The goal: allow homeowners to not still be paying off their mortgage in their retirement years.

The banks (and all securities that are invested in mortgages) would take a hit for sure, but the housing market would be cooled pretty quickly.

That would be a hit of something close to $2T: Canadians have a lot of mortgage debt. If the banks had to write off all their mortgages, it might potentially cause a collapse of the banking system. So, I do think this is a non-starter, as much as it is an innovative idea.

Aside: First, this would reward people who maxed out their mortgages and penalize owners who made the effort to pay them off -- and penalize renters as well.

And, further, having $500K mortgage debit on a $1M property when you retire is really not a huge problem as you can either sell the house or get a reverse mortgage in order to access the equity.