New mortgage rules announced

Flaherty introduces new rules aimed at curbing household debt


Finance Minister Jim Flaherty has announced a new set of mortgage rules in an effort to alleviate concerns over consumer debt. Under the new rules, the maximum amortization period has been reduced to 30 years, the maximum amount of equity to be borrowed for refinancing has been lowered to 85 per cent of a home’s value, and the government will no longer provide insurance for lines of credit secured by homes. By shortening the amortization period, the government has increased monthly payments but has shortened the amount of interest paid over the life of the mortgage, which makes building up equity easier. Economist Avery Shenfeld likens the new rules to the government putting Canadians on “a debt diet” that would further protect against a U.S.-style mortgage crisis. The minister’s announcement indicates an increasing concern in the federal government about the impact of consumer debt on the Canadian economy.

The Globe and Mail

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New mortgage rules announced

  1. Wouldn't it be nice if we lived in a democracy with open government, where these types of changes were presented for discussion, with reasons given, instead of just implemented by fiat whether or not Parliament is sitting? And no, I don't have any illusions that these things (were/would be) much different under a different party.

    • Wouldn't it be nice if people thought through the implications of their statements. Governments deal with a wide range of problems, requiring different kinds of institutions in order to make and implement policy. Subjecting every detail of foreign policy decisions, or of arcane rules by government departments to a debate would not be an effective use of Parliament's time. In other cases, such as with the Bank of Canada, parliamentary control produces suboptimal short-term decisions (when politicians run central banks they tend to inflate before elections).

      The regulation of mortgages is a one hot potato that should be kept away from parliament as much as possible. In the short term there will always be political benefits to standing up and professing one's love for the Canadian dream, homeowners, and so on.

      Those that suffer from restrictions – namely sketchy lenders and homebuyers that shouldn't be buying homes – are concentrated and will be motivated to lobby parliament. The people who benefit from a sound and stable financial system (namely, everybody), in contrast, tend to get drowned out in a parliamentary battle (because it is difficult to mobilize diffuse interests around some hypothetical long-term benefits).

      Granting the executive control over this matter is not undemocratic, it merely changes the question before voters. Instead of "do you want 40 year mortgages with NO MONEY DOWN!", the question voters deal with is broader. Did the government manage the economy effectively in its X years in office? If the answer is no, voters can vote in a different government, which can change the rules. Incidentally, this is precisely the kind of decision voters are best able to make (are you better off than you were four years ago).

    • Cabinet ministers are members of the executive branch of government (representing the Crown). MPs are members of the legislative branch. It is a bit of an anachronism of parliamentary democracy that the effective members of the executive also sit in the legislative chamber, but that is beside the point for the moment.

      The point is, the executive and legislative each have their roles. The executive governs and the legislative debates and passes legislation. There is legislation already extant the gives the executive the powers to govern by making the policy change described in this piece which you are complaining about. If every single act of the government had to be passed by parliament there would be no point in giving different responsibilities to the cabinet.

      Division of powers. This has been your daily civics lesson.

  2. Don't forget guys….the Canadian banks are in competition with each other.

    It's much easier on the banks if the Government imposes SOME limits, as opposed to banks trying to outdo each other. I'm sure the banks actually appreciated this file being taken out of their hands.

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