There is all the talk about household debt and we are at high levels.Is the secured mortgage in Canada the reason for it? Not in my opinion. The reasons for that opinion, is we are now in the lowest mortgage rates in Canadian history. Canadian can secure their mortgage payments for 10 years at 3.89%. This has never happened before, so then why all the negative headlines.
The papers and experts are not focusing on the real problem which is unsecured consumer debt. Lines of credit, credit cards are the real issue. Banks are giving these out to everyone and not checking their current debt service levels. The worst part is they do not educate the consumer on how to use these products are pay them back. It is a ongoing cycle of one card to pay another, line of credit to consolidate and so on.
Mortgages in Canada have the lowest arrears and late payments. Every mortgage needs to be qualified based on debt service guidelines, income history, proof and property verification. Canadians make their mortgage payments and do not over extend as they are not allowed too.
The other important factor is that we have a recourse law here in Canada. Which means if you default on your mortgage, they come after you personally. In the US this law does not exist so that is why there was so many foreclosure.Along with the fact that the US did not have any guidelines for qualifying on mortgages at all. Canada has always had guidelines. The longer amortizations are not the issue.
A strong housing market is good for the economy and very vital for employment. We need to focus on showing Canadians how to pay down the mortgage faster by doing accelerated weekly,biweekly payments. Putting down lump sum against the principal, automatic reduction plans. Education is the key, not more government rule changes.
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