gov't telling us how to spend out money

[brockvilleman 615]

it was just announced the gov't is tighting up the rules on morgages because we are in too much debt. is anyone out there pissed off as i am about this. i worked out the differance of the new rules on a $300,000 morgage. it means you now need $15,000 more downpayment and the monthly differance from 30 years to 25 years and the extra down payment is a whole $72.00 a month. but how long would it take some young people to save up that extra money? what will this mean to the housing industry in sales, new building and of course the other suppliers like lumber, windows, doors , lights , carpet etc. if it is truly because we cannt manage our money they are doing this , well how about some help in the credit card interest rates? how aobut cutting them to say 10% or 12% and lowering peoples limits. of course they , the gov't are ones to talk about being in debt.hmmm. welll , just looking to hear what others think and any ideas you may have so i can ad them to my letter to my local mp.

[Guest **zz**x]

Sorry BVM, the Feds should have done this 4 years ago. People are blowing their brains out with mortgage and consumer debt. No one would care if it was just about a few individuals making choices that only impact themselves but when overindebtedness becomes generalized it threatens the banking sector, real estate and eventually the whole economy. Flaherty, in part, started this part rolling because he loosened the rules around mortgage debt 4 years because that was what was happening in theUS. Not even a year later the US mortgage market blew up and now Flaherty has been moving over the past 4 years trying to put the genie back in the bottle. It is too late for condo real estate though, the bubble just popped...and will get worse with the slightest rise in interest rates.

[Guest W***ledi*Time]

... the upside is that any money added to the down-payment, or to periodic payments, is money that comes directly off the amount owed by the borrower. Which means the borrower is carrying less debt for a shorter period of time. Which means significant savings in money spent on interest in total.

[Leber 1328]

@brockvilleman I completely agree with the government on this. They're not telling you how to spend your $. They want to spend your hard earned $ wisely. How can you have a life when you a good portion of your income goes into mortgage?

 

Additional Comments:

@backrubman Investment is no difference than gambling. So I can't say I'll agree this should completely fall under the educational system. Parents need to show their kids on how to spend their money wisely early on.

[drlove 37202]

Is this change going to affect those of us who already have mortgages, with regard to the amortization period?

[Leber 1328]

No, this should not affect those who already have a mortgage.

[backrubman 64800]

@backrubman Investment is no difference than gambling. So I can't say I'll agree this should completely fall under the educational system. Parents need to show their kids on how to spend their money wisely early on.

 

I have to respectfully disagree with you there. Many trades I place have an outcome that is a mathematical certainly before the trade is even placed and then yes there are trades with risk, but again we can make the maximum loss a mathematical certainly there also with hedging. Teaching about proper risk management is part of understanding money.

[Phaedrus 209521]

it was just announced the gov't is tighting up the rules on morgages because we are in too much debt.

 

I have mixed feelings about this. In principle I'm all for letting people make their own mistakes and learn the hard way if they can't learn the easy way... but it's perhaps sensible for government to step in and protect people from the worst excesses of their own folly.

 

Similarly, yes, the market will stop banks making stupid loans to clearly irresponsible people anyway... but the market's way of correcting things is frequently swift and bloody, and I'm not sure that most of us would be terribly keen on having the entire economy suddenly tank. Again.

 

is anyone out there pissed off as i am about this. i worked out the differance of the new rules on a $300,000 morgage. it means you now need $15,000 more downpayment and the monthly differance from 30 years to 25 years and the extra down payment is a whole $72.00 a month. but how long would it take some young people to save up that extra money?

 

Some time, certainly. But they'd end up paying less interest as a result, so who's to say they're worse off at the end of the day? Depends on interest rates, obviously... but I don't think this is necessarily a bad thing. Also, I have a horrible feeling that the generation that will be most impacted by this really needs to learn that sometimes you can't have everything you want, right now.

 

But that flies in the face of not letting the government dictate to you what you do with your money, hence my conflict on this.

 

what will this mean to the housing industry in sales, new building and of course the other suppliers like lumber, windows, doors , lights , carpet etc.

 

In Ottawa: not much, I suspect, compared to the effect of the federal government eliminating 17000 positions, or whatever it is.

 

if it is truly because we cannt manage our money they are doing this , well how about some help in the credit card interest rates?

 

You can't legislate a decrease in interest rates on unsecured debt. If the govt were to try, the lenders would either simply stop lending to all but the most credit-worthy consumers, or demand collateral (or both). Neither would be pretty.

 

Bear in mind that *nobody* has to pay usurious credit-card interest rates; a credit card is a useful and convenient tool, but carrying a balance is simply foolish. If you need to borrow money there are much better options available. But that comes back to the woeful lack of financial education...

[Lowdark 5613]

From my (admittedly limited) knowedge of the financial crash, was not a large contributor to the whole thing the meltdown of the American mortgage and real estate sector? That banks and lenders were knowlingly lending money and handing out mortgages to people with very dubious finances and then trading toxic mortgages by the thousands? And when the American economy crashed so hard as a result, and dragged the rest of the globe kicking and screaming with it, how many people who did behave responsibly and cautiosly wound up being hurt as a result? I'm not one for letting the government into my finances but if there's way they can protect people from themselves moneywise as well as me, then perhaps it's worth it.

 

But I definitely agree with previous posts that there needs to be more stress put on educationg people about money. I learned my lessons the hard way and definitely would have welcome some education back in school. As it is, when it comes to money the vast majority of us go out into the world completely unarmed for the challenges awaiting us (this is perhaps the best argument for preventing credit card companies from preying on students on University and college campuses).

[Boomer 33202]

So they change the payment requirements, so what. There has been a shift in attitudes since your parents time. When I bought my first home I did put 25% down, and I had a 17.5 % mortgage. It was the norm to save and pay for what we wanted.

 

By contrast, today it's instant gratification. You want a second car, a boat, or a vacation you put it on credit. It's a shame that Carney and Flaherty have to manipulate the rules because credit has become such a burden to the average Canadian.

[loopie 15358]

I think it's better than the bank giving out loads of risky loans, having people default on the loans, the bank repo-ing loads of homes it can't get rid of, the banks tanking, the government then having to bail out the banks, and then putting these measures in place.

[Lowdark 5613]

And if I remember correctly, the Bank of Canada has been warning Canadian consumers about their credit card for years, telling them they were carrying too much debt. But people keep racking up the bills and miring themselves in debt. I hate the idea of Big Brother as kich as the next guy, but sometimes we have to be protected from our own worst enemy-namely ourselves.

[brockvilleman 615]

thanks to everyone for their responses . while reading them i began wondering, the gov't sets the rule and the banks have to comply. if the banks lend too much the gov't steps in and makes it harder for them to lend. guess i am a little confused on this as to why everyday canadians are being blamed for this. can the banks not say NO to someone. what about the share holders of the banks? if they are lending out beyond peoples means then does that not put the share holders investment in danger or at least give a smaller dividend? i still dont like the gov't intervening in our lives, oh well thats just me. i am glad i dont owe any money to anyone. i do remember when a 10% morgage was a good deal as mine at one time was 21% . hope we never see those days again.

[Guest W***ledi*Time]

Remember that this isn't a case of the government suddenly intervening where they've never before. The Canada Mortgage and Housing Corporation (CMHC) has been the federal government's policy instrument since 1946, designed specifically to encourage affordable housing for Canadians. If we really don't want government intervening in mortgages, that would mean shutting down the CMHC and the CMHC-insured miniscule 5% down-payments for residential house-buyers.

 

The only reason every consumer doesn't have to put up with meeting "normal" mortgage terms (20% to 25% minimum down-payment, etc) is exactly because the CMHC insures these high-ratio mortgages in the first place - thereby shouldering risks that the banks would not.