Remedies floated to avoid bubble

This is looking nerve-wrackingly familiar. While it was a bubble in the U.S. housing market that had much to do with the recent economic collapse, Canadian officials are now concerned about a potential post-crash bubble in this country.

Recently, the Bank of Canada warned that some consumers were taking on too much in mortgage debt, largely driven by the record low interest rates and a slower real estate market resulting in great bargains.

Finance officials expressed the need for caution, that rates were bound to go back up, and when they do, some might find it hard to keep up with payments.

The Bank of Canada took a more low-key tone, saying it would not likely raise rates as a way to dissuade prospective buyers from taking on higher levels of debt.

The more cautious approach by the bank is due to a concern that, as the economy starts regaining steam, we don't need anything to cool if off again.

The other concern is the possibility of housing prices getting out of hand, although Bank of Canada official David Wolf said earlier this month it's premature to say any such bubble has developed in the country's housing industry.

In fact, looser lending practices in the United States were cited as a major cause of the economic crash. Following that, Canadian politicians held up stricter banking regulations here as a primary reason why the country wasn't hit as hard. Thus, interest rates will rise, officials are saying - although not immediately. Other remedies are being floated to discourage people from taking on too much debt. Finance Minister Jim Flaherty has discussed such measures as raising the minimum down payment requirement above five per cent, or reducing the maximum amortization length from the current 35 years.

It's a tricky issue, one requiring all due caution. With fewer people saving sufficiently for retirement, the advice a year ago was to get people to take advantage of great housing bargains, getting them into their own homes and building equity. It would be a shame to see that trend cool off suddenly.