Ottawa once again tightens mortgage rules
Published by Dave Stevens on January 17, 2011
Ottawa is once again clamping down on the mortgage market with a package of measures to deal with Canadians' record levels of household debt.
The Finance Department has announced that it will no longer be backing mortgages with amortizations longer than 30 years, as well as reduce backing for Home Equity Lines of Credit. (HELOC's). This is a continuation of tightning that started in 2008 during the subprime mortgage meltdown in the US; the Government pulled support for 40 year amortizations in an attempt to prevent a similar occurence in Canada.
Now by lowering the guarantee from 35 years to 30 years they are hoping this will help reign in the record amount of debt Canadians are accumulating. Late last year the total household debt for Canadians surpassed 1 Trillion dollars for the first time in history. To further this, they will also be reducing the maximum amount Canadians can refinance on their properties from 90% to 85%.
Ottawa’s concerns about home equity was renewed by statistics published late last year that showed the debt levels of Canadian households have risen to record levels. The average debt per household, including mortgage and credit card debt, reached $96,100 in 2009, while household debt reached 146 per cent of personal disposable income. That trend has been driven by borrowing on mortgages, as well as consumer debt such as credit cards.
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