The document discusses recent changes to mortgage lending rules in Canada that restrict borrowing and make mortgages more expensive. Specifically, maximum amortization is now 25 years, maximum loan-to-value on refinances is 80%, and banks face limits on home equity lines of credit. Investors must put 20% down when purchasing rental properties. While these changes aim to restore stability, they may force consumers to carry higher-cost credit card or line of credit debt instead of consolidating with cheaper mortgages. However, the document argues that Canadian consumers have weathered economic challenges well by managing household debt responsibly, and that the housing market will remain robust in the long term.

1. Mortgage Changes Impact
Economic Drivers

2. We are fortunate to have weathered the
recession as well as we have. However, many
Canadians are worried about rising rates, the
possibility of decreasing home values and their
ability to save for the future.

3. 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.

4. These changes make it more expensive for
Canadians to borrow. Mortgages are the
cheapest form of debt consolidation, often
converting high-priced credit and other
instalment loans into the much lower cost of
secured debt.

5. The changes may force consumers,
who were looking at consolidating
higher-interest debt, to carry
balances on credit cards or
other unsecured lines with
higher 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.

6. By allowing consumers to
take advantage of low
interest rates to purchase
homes or tap into their
equity for spending or investing purposes, the
mortgage channel has contributed positively to
consumer spending and confidence.

7. It’s true the government has taken strong steps
to restore confidence, pouring billions into the
economy and tweaking credit rules. However, it
still comes down to actions taken by everyday
Canadians who repay their loans and
successfully manage their household debt. It’s
also strong consumer confidence translated into
spending that has helped pull us through this
most recent recession.

8. As a result, Canada continues to
operate on sound financial
principles, and our housing and
mortgage markets will remain
robust in the long term.

9. Randy Bett
www.BetterGroupRealEstate.ca