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Decision to stick with mortgage rules praised

By Robert Hof

This piece is reproduced from the Toronto Star, March 31st, 2012

Some brokers feared tighter leash on buyers.

Canada’s mortgage brokers are applauding Ottawa’s decision to hold its fire on further measures that would make it tougher for home-buyers to borrow.

Having tightened the rules governing mortgages three times in the last three years, the federal government has kept its powder dry in the 2012 budget.

Instead, Ottawa said it plans to tighten its oversight of Canada Mortgage and Housing Corp., the national mortgage insurance agency.

“For the consumer, there’s no immediate changes,” said Jim Murphy, president and chief executive officer for the Canadian Association of Mortgage Professionals.

Too much tightening too soon could have the unintended effect of dampening demand for housing along with many construction jobs the sector creates, Murphy cautioned.

During pre-budget consultations, some lenders had argued the federal government should increase the required down payment to qualify for a loan to 7.5 per cent of the property’s value, up from the current 5 per cent. Some lenders also wanted Ottawa to reduce the length of time a home-buyer has to fully repay their loan from 25 years, down from the current 30 years maximum amortization period.

Both moves would have made it tougher to buy a home.

Ottawa has already tightened mortgage borrowing rules three times since the recession of 2008 as record low interest rates drove household debt loads to record highs. Both federal Finance Minister Jim Flaherty and Bank of Canada governor Mark Carney have cautioned that over-indebted households could run into trouble when interest rates start to rise.

There are signs those previous measures, which raised minimum down payments and shortened amortization periods, are working, Murphy said.

Household debt loads eased in the latest three-month period and condo sales in the overheated GTA market slowed down, he noted.

The government appears to be looking at bringing Canada Mortgage and Housing Corp. more closely under the control of the finance department. CMHC is currently part of the human resources department due to its historic role in promoting social housing.

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