Ottawa has expressed concern over the possibility that many Canadians are taking on more debt than they can afford because of the current record-low interest rates that will inevitably rise. While Finance Minister Jim Flaherty has said that Canadians are snapping up homes and putting themselves into debt they won’t be able to get out of, a recent survey by the Canadian Association of Accredited Mortgage Professionals suggests otherwise.
The Muddy York Real Estate Blog previously reported that the survey data reflected the Canadians were being more cautious with their mortgages. 86 per cent of Canadians are opting for fixed rate mortgages despite the record-low interest rates, and the majority of Canadians are borrowing much less than they can afford to.
Now, economists and banks are warning the government that changing the current mortgage rules will hurt the housing market. Minister Flaherty has said that the government is lowering the maximum amortization period from 35 years to 30 years as well as increasing the minimum down payment from five per cent to 10 per cent.
Similar measures had been put in place almost two years ago, when the minimum down payments were increased from zero per cent to five per cent, and the maximum amortization rate was lowered from 40 years to 35 years.
The CEO of ING told the Globe and Mail this month that, “I worry about government-based tightening of the mortgage rules creating a much worse reaction – too fast of a cooling, which is not really good for anyone.”
On the other hand, the head of Home Capital Group Inc., a mortgage lender told the Globe and Mail that, “…this is just a bit of tweaking, which would help make the long-term market very secure.”
Whether or not the mortgage regulations will in fact be changed or not will be announced in early March when the federal government’s budget is announced.
