OTTAWA (NEWS1130)-  Ottawa is changing mortgage rules again to make it more difficult for Canadians with limited savings to buy homes or borrow against your existing property.

The changes take effect July 9th, 2012.

“We will reduce the maximum amortization period to 25 years from 30 years for new government-backed insured mortgages,” explains Finance Minister Jim Flaherty.

“This will further reduce the total interest payments Canadian families make on their mortgages, helping them build up value in their homes more quickly, and pay off their mortgage debt sooner,” he says.

Cameron Muir, chief economist with the BC Real Estate Association says this will affect one particular segment of the market. “It’s primary first-time buyers, young buyers, who are opting to go for high-ratio mortgages as a result of having a fairly low down payment.”

“The change between a 30-year amortization and a 25-year amortization will have an impact on their purchasing power, however the amount is going to be relatively marginal once you do the calculation,” he explains.

Flaherty has also announced borrowing against your home will be limited to 80 per cent of its value, down from the current 85 per cent.

This is the third time the feds have tightened mortgage rules in order to avert a household debt crisis since 2008. The new measures are part of a series of initiatives undertaken recently by the federal government to slow down the accumulation of debt of Canadian households, which reached a record 152 per cent of income in the fourth quarter of last year.

Is the government saving us from our love of debt?

“I think longer-term, it will put consumers in a better position to manage interest rate increases,” predicts Scott Hannah, president of the Credit Counselling Society.

He thinks it will force Canadians to rein in borrowing and spending.

Hannah says we are no better than many people south of the border and just look at what has happened there.

He adds just because you qualify for a higher mortgage doesn’t mean it is in the consumer’s best interest, but these measures could help, at the expense of people desperately stretching their budget to get into the housing market.

“If consumers aren’t taking action themselves… to better protect themselves from rising rates, I think our government said ‘We need to step in,’” he explains.