So word has it that Finance Minister Jim Flaherty is going to announce new 2012 mortgage rules for Canada that will essentially make it harder for Canadians who have limited savings to get the loans they need to buy homes.
To start, the new 2012 mortgage rules will cut the maximum term for a mortgage by five years, so that it is a 25-year term, rather than 30 years.
Second, refinancing against the equity in your home will be limited to 80% of the value of the home; it was at 85% before.
So, why is all this happening now? Well, it seems that Canadians are accumulating way too much debt and Ottawa wants to make sure that it doesn’t get any more out of hand. As it stands now, Canadian household debt reached a record 152% of income at the end of 2011.
Since 2008, this is the fourth time that Ottawa has taken measure to tighten the mortgage rules for Canada. While the central bank has resisted raising the interest rates out of fear that it would discourage borrowing, damage an already weak economy and raise the value of the loonie, it’s evident that changes need to be made.
Rather than take on discouraging debt for Canadians in general, bank governor Mark Carney thinks the best approach is to target the real estate market specifically via new 2012 mortgage rules for Canada.
According to CIBC deputy chief economist Benjamin Tal, however, the Bank of Canada should keep interest rates low through to 2014, although it’s obvious that any abrupt changes to the housing market may have a sudden effect on the economy as a whole.
Luckily, the interest rate is holding steady at 1% for now.
Read more at CTV.ca