Today (January 17th, 2011) Finance Minister Jim Flaherty announced three new changes to Canada’s mortgage rules. The three changes are as follows:

1) A reduction of maximum amortization from 30 to 35 years for insured mortgages, or in other words mortgages that normally exceed 80% of the properties value.
2) Lowering the maximum amount Canadians can borrow in refinancing their homes to 85% from 90% of the value.
3) Withdrawing the backing of government insurance on home equity lines of credit (HELOC’s).

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.

If you, or anybody you know, are thinking of purchasing or refinancing in the future and are worried about how the new changes will affect you please feel free to contact us directly. Alternatively, if you, or anybody you know, are feeling the pressure of exorbitant credit cards fees and would like to discuss the possibility of consolidating your debt into your mortgage or a low interest-bearing secured line of credit, we would be more than happy to take you through your options. Please feel free to contact us today at 416-214-9000.

Marcus Tzaferis