CMHC agreeing with brokers?

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A new report is backing up a broker beef, confirming consumer credit card debt has significantly outpaced mortgage growth.

“Consumer credit, which makes up the remainder of household debt, grew at a faster rate than mortgage debt in the last two decades,” reads the 2011 Canadian Housing Observer, a comprehensive CMHC report on the state of Canadian.

Specifically, total household credit debt increased by 5.5 per cent between 1991 and 2000 and by another 9.3 per cent in the 2001-2010 period.

That’s in stark contrast to mortgage debt, according to the government agency. The proportion of residential mortgage debt to household debt was fairly stable during that 2001 - 2010 period, fluctuating between 69.0 per cent and 67.7 per cent.

The difference highlight the real the “real threat” to the economy, charge brokers suggesting the government has been too focused on tightening mortgage rules and not enough on controlling the way banks provide and manage consumer credit debt.

The report, in fact, comes amid growing speculation that irrepressible household debt levels will encourage the federal government to further tighten those mortgage rules.

"I would say so,” Dave Larock, president of TMG The Mortgage Group Integrated Mortgage Planners, told “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 of last year, 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 in December.

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.

  • Jeremy on 2012-01-05 5:56:15 AM

    Bingo! Finally! The issue is not mortgages, it's consumer credit and the ease at which it is obtained!! Wake up Flaherty. Stop listening to the banks, they are trying to protect their gold egg, high interest credit facilities.

    Slowing down consumer credit will have more of an affect than slowing down mortgage borrowing. Banks are working for their shareholders and shareholders want large profits which come off the backs of hard working Canadians. Ed Clark, you should be a politician.

  • Kenzie MacDermid on 2012-01-05 6:19:22 AM

    This is all playing into the banks hands. The default rate is not an issue in Canada. This is a ploy to ensure the banks can rate surcharge the self employed in future lending. The MQR rate is going to do enough damage all ready. Too many rule changes in such a short time will surely result in a mess. Last i checked the banks are still making record profits in a down economy. Why not wait until the economy improves before more tightening.

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