In a recent interview with QMI Agency, Federal Finance Minister Jim Flaherty expressed concern that Canadians are being weighed down by a mountain of debt – particularly mortgage debt and home equity loans.
“Part of it is rational in the sense that people can carry more debt when interest rates are very low,” Flaherty commented. “And no doubt people have bought more expensive houses than they need to have because they could afford to, because interest rates are low…Our concern is at the moment is as interest rates go up, which they inevitably will, we want people to be able to afford their obligations.”
As an Edmonton Realtor, I certainly understand the Minister’s point and agree that some Canadians have over-extended themselves in terms of debt. However, even when interest rates increase (which they most certainly will), there’s really no expectation that the jump will be severe and cause shockwaves across the country. In other words, it won’t be anything like the sub-prime nightmare in the US, where some home owners went from paying $800 a month to $1800 a month literally overnight.
So yes, higher rates will mean an increase in the amount many Canadian's pay per month – but I don’t think it will be one that radically and dramatically puts people “under water” when it comes to their house (FYI: “under water” is when a home owner owes more on their home than it is worth, and so must keep paying the monthly mortgage fee even though they can’t afford it – this is a dismal scenario that continues to play out across the US).
As for changes in store for 2011, Flaherty isn’t tipping his hat on what he might do – other than suggesting that something is in the works. Whether this means requiring a larger down payment, or capping the mortgage amortization at 25 years, is a mystery…at least at the moment!
In my view, anything that will help Canadians choose and afford the right mortgage – one that fits their needs and their lifestyle – is good news.
Personally, I love it when I help a home owner find the perfect house – which is not necessarily the most expensive house on their short list. The perfect house is the one that fits them and their unique situation, both as a residence and, indeed, an asset.
If you’re looking buy or sell a home in Edmonton, then call me at 780-709-0811. I’ll work with you to help you find the home that fits your lifestyle and needs, and connect you with qualified mortgage professionals who will explain the ins and outs – without confusing jargon! – so you get the best mortgage possible, and one that give you peace of mind…and not sleepness nights!