This month Jim Flaherty announced 3 changes to the lending practices banks will have to follow. This comes in an effort to stem the increasing burden of debt that we are seeing in Canada. The following are the basic changes announced.
1. A reduction of maximum amortization from 35 to 30 years for insured mortgages, or in other words mortgages that normally exceed 80% of the property’s value. Effective date March 18, 2011.
2. Lowering the maximum amount Canadians can borrow in refinancing their homes to 85% from 90% of the value. Effective date march 18, 2011.
3. Withdrawing the backing of government insurance on home equity lines of credit (HELOC’s). Effective date April 18, 2011.
A representative for MorCan Financial had the following to say about the new changes…
Although these measures are designed to tackle Canadians’ recent surge in debt, they fail to tackle the real problems and effectively punish those who need the most help. These measures play into the hands of increasingly rapacious credit card companies, which charge exorbitant interest rates to people who are most in need of help and decrease Canadians’ ability to use their homes as a secure avenue for low interest-bearing credit. It brings to mind the phrase “rearranging the deckchairs on the Titanic”, an idiom which would perhaps be more apropos if rearranging the deck chairs caused the Titanic to sink faster. The solution to our debt problems lies in effectively managing our debt and eliminating the burden of high debt bearing credit. Mortgages are the solution and not the problem.
Please contact Marcus Tzaferis for your mortgage needs or to answer any questions you may have.
1006 King Street West
Toronto, Ontario M6K 3N2