MORTGAGE RULES GET TIGHTER
Mr. Flaherty presses rewind and brings the CMHC mortgage insured amortization period back to a maximum of 25 years. Many people forget that in 2006, the Conservatives increased the amortization period to a ridiculous 40 years and have been scaling back that very poor decision with revisions to 35 year amortization and then a maximum 30 year amortization.
As of July 9, 2012 the maximum CMHC insured mortgage amortization period will be back to 25 years.
A longer amortization period means people will pay more interest on their mortgage. So the longer amortization periods combined with historically low interest rates have led many Canadians to take on large amounts of cheap debt. The problem with cheap debt being, interest rates are not always going to be 3% for a 5 year fixed rate mortgage. Both Mr. Flaherty and the big banks in Canada know that the spectre of rising interest rates will happen and people locked into a 5 year $300000 mortgage with a 35 year amortization will be shocked to learn that they still owe $275000 after paying out close to $75000 over 60 monthly payments.
This move by Flaherty is an acknowledment of how silly the decision to ever increase the amortization was in the first place.