Mortgage Changes Impact Economic Drivers

We are fortunate to have weathered therecession as well as we have. However, manyCanadians are worried about rising rates, thepossibility of decreasing home values and theirability to save for the future.

This year we have seen three sets of changes that restrict mortgage lending in Canada. Maximum amortization is now at 25 years and the maximum loan-to-value on refinances is 80%. Banks are also limited on their HELOC (Home Equity Line of Credit) products. Investors who purchase rental properties now have to put 20% down.

These changes make it more expensive forCanadians to borrow. Mortgages are thecheapest form of debt consolidation, oftenconverting high-priced credit and otherinstalment loans into the much lower cost ofsecured debt.

The changes may force consumers, who were looking at consolidating higher-interest debt, to carry balances on credit cards or other unsecured lines withhigher costs. It’s easy to forget that the housing market has been a vital contributor to the success of the Canadian economy during the past decade. In many respects, the housing and mortgage industries have helped stabilize a faltering economy.

By allowing consumers totake advantage of lowinterest rates to purchasehomes or tap into their

equity for spending or investing purposes, themortgage channel has contributed positively toconsumer spending and confidence.

It’s true the government has taken strong stepsto restore confidence, pouring billions into theeconomy and tweaking credit rules. However, itstill comes down to actions taken by everydayCanadians who repay their loans andsuccessfully manage their household debt. It’salso strong consumer confidence translated intospending that has helped pull us through thismost recent recession.

As a result, Canada continues tooperate on sound financialprinciples, and our housing andmortgage markets will remainrobust in the long term.

Randy Bettwww.BetterGroupRealEstate.ca