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Mortgage rules curb debt

Tougher mortgage lending protects economy

Finance Minister Jim Flaherty announced new rules for Canadian mortgages on Monday, January 17 that he said will protect the stability of the economy. Three new rules for the mortgage industry will come into effect March 18.

Mortgage amortization periods will be reduced from 35 years to 30 years. The maximum amount Canadians can borrow to refinance their mortgages will be lowered from 90 per cent to 85 per cent of the value of their homes. The government will withdraw its insurance backing on lines of credit secured on homes, such as home equity lines of credit.

The Bank of Canada announced earlier this month that Canadians’ domestic debt burdens had hit the highest levels on record. The bank said the ratio of household debt to disposable income had reached 148 per cent, which is higher than in the United States.

Anita Lundeen, president of the Powell River Sunshine Coast Real Estate Board, said she didn’t expect the new rules to have an impact on the market in Powell River. “For the most part, I don’t think it’s going to affect Powell River at all,” she said.

The reduction in the maximum amortization period from 35 to 30 years won’t be a factor in Powell River, Lundeen said. “For most of our lending institutions here and for our realtors who advise people in taking mortgages, the majority of them have always been for 25 years,” she said.

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