New Mortgage Rules in 2011

As you may have heard, the Federal Government announced another batch of new rules surrounding mortgage borrowing in Canada, which will take effect March 18, 2011.

Canadian Finance Minister Jim Flaherty announced steps to tighten record household borrowing amid concern rising debt levels could threaten the economic recovery. Policymakers including Mr. Flaherty and Bank of Canada Governor Mark Carney have been urging households in recent months to be wary of taking on too much debt after data showed the indebtedness of Canadians surpassed U.S. levels for the first time in 12 years.

Canada will shorten the maximum amortization period for government-insured mortgages to 30 years from 35 years, and lower the maximum amount homeowners can borrow against the value of their homes to 85 percent from 90 percent. The government has also announced that it will no longer insure Home Equity Lines Of Credit – meaning lenders are going to have to take on the associated risk themselves. Something they may or may not be willing to do, moving forward. While those are the new rules in a nutshell, there were a lot of questions left unanswered with the government’s announcement. It will be interesting to see what effect these changes will have on the Canadian Real Estate Market.

While the government may think it is doing its part to curb excessive household debt in Canada, it seems the majority of the mortgage brokering industry is in consensus – mortgage debt did not need any more “curbing.” Many believe that, with so many changes to mortgage rules in recent years, this batch of changes should have focused on other, higher-interest forms of debt – like credit cards and cars.

Others feel that we elect our leaders not to oversee us but to guide us and lead us. We assume that they will make decisions based on our collective best interests and that rules, regulations, laws and legislation that they enact are there to protect us from each other, and from ourselves. We watched in awe as our neighbours endured the collapse of their largest financial institutions and we could draw it all back to shoddy lending practices and utterly relaxed rules and regulations. In watching a neighbouring country’s economy implode over the last few years, we have decided, as a nation, to take steps to avoid the same fate.

I would love to hear your opinion about these new rules.

Tanya Miedema, Axiom Mortgage Solutions

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