VANCOUVER (NEWS1130) – New mortgage rules meant to curb Canadian household debt kick in today, but there are skeptics as to whether it’ll do just that.  

Under the new rules, the maximum amortization period for a mortgage is 25 years, and you can only get a home equity loan up to 80 per cent of the value of your place.
However, the Canadian Credit Counselling Society says that’s not enough to convince people to spend less and save more.  Executive Director Scott Hannah says many Canadians are still carrying massive credit card debt and using lines of credit to pay their mortgages.  He adds people have a false sense of security when borrowing money because of low interest rates.  

“By having an interest rate that is so low, it doesn’t encourage people to save,” Hannah explains. “They’re going to say, ‘if all I get is one percent of my money then what’s the point of saving?’”

Hannah says his client load has spiked 125 per cent per cent since the 2008 recession.  He fears that number will go up even more when the Bank of Canada eventually raises the key interest rate.

“Within the next few years, we’re going to see mortgage rates creep up,” Hannah warns. “That will impact consumers who really borrowed to the maximum level possible.  So when those rates start to come, they may not be able to manage that.”

Hannah says while it’s good to see the federal government try to reign in household spending, what’s really needed is better financial education to help people balance their pocket book.