Gov't tightening Mortgage Rules

Flaherty has tightened mortgage rules today – a follow through I guess on his warnings about too much Canadian household debt.

Any comments? How important is household mtge debt in the scheme of things in the wealth accumulation department?

1.The Finance department is expected to announce that they will stop backing amortization periods longer than 30 years.
2. Reduce government backing for home equity lines of credit by clamping down on the insurance that CMHC offeres to lines of credit.
3. Limit the amount that you can draw to 85% vs 90%.

Rational is making sure you can manage your debt payments when interest rates rise or if you lose your job.

My perspective - Although not tax deductable, we would consider mortgage debt to be a good debt vs bad debt for personal consumption which is usually the category the line of credit debt falls into. With most canadians their home makes up a large part of their networth and serves a purpose beyond just the financial wealth accumulation. It's just This shouldn't have a significant impact on most people except at the margins. The average debt per household in 2009 reached $96,100 and 146% of personal disposable income.

Okanagan CFA Forecast dinner is this Thursday if you want some opinions on where interest rates are headed. You can visit our website and click on events.