New stats threaten to scuttle mortgage rule changes

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Better-paid consumers may have taken the wind out of the government’s sails as it considers embarking on another round of mortgage rule changes.

According to StatsCan's latest report, household credit fell to 150.6 per cent of income from the record high of 151.9 per cent recorded in the third quarter.

That household debt includes mortgages, consumer credit and loans.

It was rising income, and not more conservative spending, that appears to have reversed the tides.

While Canadians continued to increase their overall debt load,  to $1.60 trillion from C$1.58 trillion in Q3, their disposable income outpaced that.

Still, the mortgage industry is hoping overall easing of household debt levels relative to income will scuttle any government plans to further tighten mortgage rules in order to get Canadians to rein in spending.

But there’s growing indication Finance Minister Jim Flaherty could move to lower the maximum amortization for insured mortgages to 25 years and, possibly, hike the cost of default insurance for borrowers.

Last month, some 10 of 14 economists and strategists surveyed for Reuter’s first poll on the Canadian housing sector 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 the March 29 budget announcement.

The Central Bank’s decision this month to hold its overnight interest rate steady have increased speculation, as did BMO’s reintroduction of that 2.99 per cent interest rate on five-year fixed mortgages.

The fear is that last move lead to a bump-up in new mortgages, reversing the gains consumers made in the last three months of 2011.

  • Elfie Hayes on 2012-03-17 1:00:27 PM

    Next time there is an election ask yourself if you will once again vote for a government that lets the banks crank out credit to overburdened consumers like candy at a birthday party wile making home ownership harder to achieve year after year.

    During the recent recession the driving force behind our financial stability was our housing market. Strong sales, cheap rates, default rates of under 1/2 of one percent. Also during the recession many who lost their salaried or hourly jobs, created their own employment by opening a business thus keeping themselves off the unemployment roles.

    This is the thanks Mr. Flahrety is giving us!! Annual tightening of mortgage rules, higher costs for the self employed borrowers and now more talk of reducing Amortizations again. I guess he won't stop till he kills the housing industry and no one can buy a home, but then he lives in quite the little jewel in Whitby so why worry about the rest of Canadians.

    It's obvious Jimmy is a Bank's best friend, paving the road to higher profits by letting them throw consumer debt at each and every person who walks in the door without having to take an ounce of blame for the high levels of debt Canadians have.

    It doesn't take an Einstein to see what's troubling our economy and it's not now nor has it ever been having a home with a mortgage.

    I didn't vote for Jim and I never will. The sad thing is during the next election which of the three stooges will we vote for???

  • Julia Krause on 2012-03-20 5:04:36 AM

    Elfie, your comments are 100% exactly bang-on RIGHT and well written too!! YAY!!

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