By Tom Bradley

Many commentators and economists have made comparisons between the U.S. housing market of 10 years ago and our market today. There are so many differences between the two, that I don’t find the link to be that useful. The makeup of our market is unique, as is our banking system, tax structure and social safety net.

I must admit, however, I was reminded of the U.S. debacle when I saw an ad in last Saturday’s Globe and Mail (and presumably in lots of other publications). CIBC is advertising a 4-year mortgage with a unique feature – it has a lower payment rate for the first 9 months (1.99%), after which it increases to 2.83% for the remainder of the term. Overall, the mortgage rate works out to 2.69%.

A couple of things jumped off the page at me.

First, it’s an amazing time to be a borrower. Four-year money at 2.69%. Wow! And if you’re a client in good standing and have decent negotiating skills, you can probably do better.

Second, the strategy of using ‘teaser’ rates (pay less initially and more later) was a prominent feature of the U.S. meltdown. The strategy was taken to extremes down there (no interest or no payments for x months) and it induced people to buy homes before they were ready financially.

The CIBC tease is minor in the scheme of things, but it makes me wonder. Who is this good for? Does the housing market need these kinds of incentives? And more to the point, when will the other banks follow and become even bigger teases?