New mortgage rules announced

Flaherty introduces new rules aimed at curbing household debt

Finance Minister Jim Flaherty has announced a new set of mortgage rules in an effort to alleviate concerns over consumer debt. Under the new rules, the maximum amortization period has been reduced to 30 years, the maximum amount of equity to be borrowed for refinancing has been lowered to 85 per cent of a home’s value, and the government will no longer provide insurance for lines of credit secured by homes. By shortening the amortization period, the government has increased monthly payments but has shortened the amount of interest paid over the life of the mortgage, which makes building up equity easier. Economist Avery Shenfeld likens the new rules to the government putting Canadians on “a debt diet” that would further protect against a U.S.-style mortgage crisis. The minister’s announcement indicates an increasing concern in the federal government about the impact of consumer debt on the Canadian economy.

The Globe and Mail