Conservatives bring in new mortgage restrictions, suggest some Canadians can’t manage their money
Ottawa was abuzz with speculation this morning, when the feds announced an early press conference with Jim Flaherty. Was it to be about bargaining with the NDP? Building a hockey arena in Quebec City? Funding tax harmonization with Quebec? None of the above. The presser was about mortgage reforms and insurance on lines of credit.
How dare the government fool election chasers with an announcement of actual substance!
The Globe and Mail has the details of Flaherty’s announcement:
Finance Minister Jim Flaherty announced Monday that new federal rules will reduce the maximum amortization period to 30 years from 35 years for government-backed insured mortgages with loan-to-value ratios of more than 80 per cent.
Secondly, Ottawa will lower the maximum amount Canadians can borrow in refinancing their mortgages to 85 per cent from 90 per cent of the value of their homes.
Thirdly, Ottawa will withdraw government insurance backing on lines of credit secured by homes.
With this, Flaherty is clamping down on expansions in the mortgage market that have all happened under the Conservatives’ watch.
While some of these measures are certainly a good idea, Flaherty soured things by implying that Canadians are a bit dumb with their money. According to the Toronto Star, Flaherty said the clampdown on HELOCs is because people have been using the equity in their homes to finance boats and such—because nothing is more useful to someone in a one-bedroom condo than a boat.
“This will prevent Canadians from taking on excessive debt,” Flaherty told a news conference, noting that Canadians in some cases are remortgaging their homes to buy boats and other large ticket items instead of reinvesting in their homes.
Critics were quick to make comparisons with Scott Reid’s infamous “beer and popcorn” quote from 2005, which is pretty weird: is the message that neither party has a spokesperson who can talk about money without insulting taxpayers? Somebody call Rob Ford and offer him a job in Ottawa.
• Flaherty details new mortgage rules [Globe and Mail]
• Ottawa tightens mortgage lending rules [Toronto Star]
• Mortgage curbs unlikely to derail property market: Economists [Toronto Sun]
• UPDATE: Canada Fin Min Tightens Mortgage Rules As Household Debt Soars [Wall Street Journal]