Another reason not to tighten mortgage rules?

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A new report confirming consumers have scaled back on their non-mortgage debt may extend brokers a helping hand in their fight to block further tightening of Canada’s mortgage rules.

As a whole, credit card debt, lines of credit, and consumer and car loans grew just under one per cent in 2011, according to TransUnion’s latest quarterly assessment, released Thursday. That’s the lowest annual rate since 2004.

The pullback should help lower concerns about escalating household debt levels, prompted, in part, by today’s low interest rates.

Brokers are also hoping the good news helps encourage Ottawa to abandon any plans in the works to ratchet down on mortgage rules.

That hope may ultimately be short-lived, with economists suggesting the federal government could make its move as early as next month.

Some 10 of 14 economists and strategists surveyed for Reuter’s first poll on the Canadian housing sector last week said Ottawa does, indeed, seem poised to tighten mortgage rules within the next 12 months.

Moreover, they believe that intervention is likely to come as early as the busy spring season.

The poll results only adds to broker concerns that the federal government is planning to reduce the maximum amortization for CMHC-insured mortgages to 25 years instead of the current 30. The government is just as likely to increase the cost of mortgage insurance, say analysts.

Brokers are already concerned that the CMHC has effectively moved to discourage lenders from growing their self-employed borrowers – themselves included.

Earlier this month, the Crown corporation warned lenders they’ll face increasingly limited access to bulk insurance for their conventional loans as the CMHC’s $600 billion fund comes within 10 per cent of its government-set ceiling.

At the same time, documents from the Office of the Superintendent of Financial Institutions revealed the regulator’s concerns over mortgage lending for self-employeds and lender underwriting standards on those loans.

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