Changes in Canada mortgage rules likely due to low rates


Canada, 9th September: The Canadian government is likely to change mortgage rules keeping in view the low interest rates in the nation.

Canada, 9th September: The Canadian government is likely to change mortgage rules keeping in view the low interest rates in the nation.

This will be done to protect any bubble in the hot and happening Canada housing market, states Craig Wright, chief economist of RBC Financial Group. He was addressing a gathering at the Economic Club of Canada.
Low rates risk higher debt levels for Canadians–Its being feared that low interest rates are going to increase debt levels of Canadians since low interest rates are an invitation to Canadians to borrow rather than save.
And, this becomes quite evident keeping in view the fact that the Bank of Canada, earlier this week, reiterated its decision of not increasing the benchmark rate at one percent for the eight month in a row in the coming times.
Canada mortgage rules will change--According to deputy chief economist for TD Bank, Derek Burleton, debt loads among Canadian households are showing a worrisome increase.
Speaking at the Economic Club of Canada event at Toronto, he said that interest rates are quite low than expected, and this is a natural factor asking consumers to go on a spending spree, thereby creating imbalances.
Consumer borrowing had remained under some control, thanks to the introduction of tighter Canada mortgage rules in the past few years. And, the policymakers of Canada are going to be compelled to such a route once again, adds Wright. This could be either an increase in the minimum amount for mortgage insurance or shorter period of amortization, Wright informed.
Although, wages in Canada have been increasing at a snail’s pace, but still, it will not inhibit Canadian consumers to avoid spending spree, stated Burleton. Hence, consumers’ spending will increase in the year 2012, he asserted.
It is being predicted that the income-to-debt ratio of Canada households is going to cross 150 percent from the current 147 percent, due to alluring borrowing even in low-wage environment resulting in higher debt levels for Canadians in the next two years.
So, there is still room for tighter mortgage measures in case Canada debt levels don’t show any decline in the coming times, Wright hinted.