Irrepressible household debt has brokers and bankers more convinced that tighter mortgage rules are on the horizon. (Happy New Year?)
"I would say so,” Dave Larock, president of TMG The Mortgage Group Integrated Mortgage Planners, told MortgageBrokerNews.ca. “ I wrote in my blog on August 22, 2011, that ‘if ultra-low rates continue to push consumer debt levels higher, another round of mortgage rule changes is inevitable. You can bank on it.’”
He’s not alone, with top bankers now sounding the same tune following new national debt number released Tuesday.
Both mortgage and consumer credit debt spiked in the third quarter, increasing to $1 trillion and $448 billion, respectively, according to a StatsCan. Those individual debt levels increased even as personal disposable income remained unchanged.
That suggests yet more government intervention is needed to slow down mortgage borrowing, Ed Clark, CEO at TD told reporters on Wednesday.
Brokers have roundly rejected the need for the federal government to place any more speed bumps in the way of Canadians looking to buy new or refinance old. This spring saw the maximum loan to value for insured refi drop to 85 per cent at the same time maximum amortizations fell to 30 years, from 35.
Additional tightening would likely come in the form of a further lowering of the amortization cap and/or an increase in the cost of mortgage insurance.
The federal government is advised to introduce any new changes over time, rather than in one fell swoop, said Larock. But make no mistake those changes – like those made over the last two years – may be best for the overall health of the housing market, he said.
“I know that many of my mortgage planning colleagues loudly decried all three rounds of mortgage changes as they happened,” he told MortgageBrokerNews.ca. “I don’t think it’s too much of a stretch to say that borrowing levels would be much higher if those three rounds of changes had not been made.”