Good morning all,

This morning the government announced changes to financing regulations for canadians. This is designed to slow the housing market in Canada, reduce borrowing / speculation, and induce canadians to save by paying down their mortgage. Like all government interventions, the intentions may be honorable but the delivery can sometimes be like chopping the patients arm off when a band aid would do. Barrie Real estate for sale

First off, I do absolutely support fiscal responsibility, however, I believe that I am responsible for my own fiscal house being in order, I don’t need a government to do it for me. The issue that I feel as Canadians we run into is that the government seems to think that it knows what’s best for all canadians, even though it seems to ignore it’s own financial situation. I.E. When the govt started to run out of money a few years back it just started printing more of it, hmm. Call me cynical but stop meddling! I firmly believe that I shouldn’t borrow than I can afford to pay back and that I should be responsible, with advice from the correct sources, about how to run my own financial affairs. These latest changes will undermine peoples ability to refinance when that ability may just keep them out of trouble. I foresee more Power of Sales ahead because this is putting a straight jacket on people and reducing their ability to maneuver. That doesn’t mean that that you should go out and borrow as much as you can, it means you should take ownership of your own house and IF you can afford to borrow then it’s OK. So the next question could be, with regard to Real Estate, and Barrie Real Estate in particular, when is it OK to borrow and probably more importantly what are you borrowing for?

That’s a whole new conversation, however, I would simply make this statement in y humble opinion, ‘If you borrow money at 5% to invest it in something that pays you more than 5%’ that’s generally speaking OK! If you borrow money at 5% to buy a car that might still be OK if you were going to borrow the money on an unsecured line at 8%, however, here is the proviso, ONLY if you can afford it easily out of your day to day cash flow. Generally speaking I am not a fan of borrowing to buy a depreciating asset.

By the way, not to blow my own trumpet because I didn’t come up with that statement, however, if we could teach the world that concept it would be a whole different place! OK, getting off my soap box now. Back to the matter in hand. The full statement from the Govt. regarding changes in mortgage financing is enclosed below. Please ensure you are familiar with the changes as they could impact your ability to refinance and move around. Will this slow down teh housing market, yes absolutely, but then I ask you, was it exactly out of control in the first place? Selling homes in Barrie

Ottawa, January 17, 2011

The Harper Government Takes Prudent Action to Support the Long-Term Stability of Canada’s Housing Market

Related Document:

The Honourable Jim Flaherty, Minister of Finance, and the Honourable Christian Paradis, Minister of Natural Resources, today announced prudent adjustments to the rules for government-backed insured mortgages to support the long-term stability of Canada’s housing market and support hard-working Canadian families saving through home ownership.

“Canada’s well-regulated housing sector has been an important strength that allowed us to avoid the mistakes of other countries and helped protect us from the worst of the recent global recession,” said Minister Flaherty. “The prudent measures announced today build on that advantage by encouraging hard-working Canadian families to save by investing in their homes and future.”

“The economy continues to be our Government’s top priority,” continued Minister Paradis. “Our Government will continue to take the necessary actions to ensure stability and economic certainty in Canada’s housing market.”

The new measures:

  • Reduce the maximum amortization period to 30 years from 35 years for new government-backed insured mortgages with loan-to-value ratios of more than 80 per cent. This will significantly reduce the total interest payments Canadian families make on their mortgages, allow Canadian families to build up equity in their homes more quickly, and help Canadians pay off their mortgages before they retire.
  • 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. This will promote saving through home ownership and limit the repackaging of consumer debt into mortgages guaranteed by taxpayers.
  • Withdraw government insurance backing on lines of credit secured by homes, such as home equity lines of credit, or HELOCs. This will ensure that risks associated with consumer debt products used to borrow funds unrelated to house purchases are managed by the financial institutions and not borne by taxpayers.

Our Government’s ongoing monitoring and sound underlying supervisory regime, along with the traditionally cautious approach taken by Canadian financial institutions to mortgage lending, have allowed Canada to maintain strong and secure housing and mortgage markets.

The adjustments to the mortgage insurance guarantee framework will come into force on March 18, 2011. The withdrawal of government insurance backing on lines of credit secured by homes will come into force on April 18, 2011.

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