Mortgage rates have been rising over the past few weeks, and that has left most consumers, both homeowners and home buyers, crying that they won’t be able to afford their mortgages. Of course these rising rates do have an impact on those looking to get a mortgage, and they can marginally increase monthly payments for those trying to pay their home loan. So what could possibly be good about that? What positive spin is there to put on rising mortgage rates?
Maybe the only positive that comes from them is the fact that the government will finally step away from dealing in mortgages – but it’s a huge positive to be found in an environment when consumers, brokers, and banks alike are all growing weary of government interference. No one needs to be reminded of the most recent changes made, when Finance Minister Jim Flaherty announced last July that amortization periods on insured mortgages would be cut back to 25 years. That was a massive change, and although it wasn’t the only one made at the time, it was the one that had the most impact.
With this rule many first-time buyers were left out of the market, because they simply couldn’t afford the 20 per cent down payment needed to obtain an uninsured mortgage. It also had major brokerage associations, such as CAAMP making very bold predictions about the amount of the workforce that would be affected by the change, and how the construction industry would all but collapse.
No one wanted the changes to be implemented, but they were necessary because mortgage rates were at historical lows, and consumers were taking on way more debt than they could afford. Flaherty and then-governor of the Bank of Canada, Mark Carney, repeatedly warned Canadians to watch their debt load, but those messages largely went unheeded. With borrowing available so cheaply, and Canadians not slowing down in the least, the government all but had to step in.
Now, with mortgage rates rising, the government will no longer need to implement any more rules. While it will still be harder to borrow, affordability will be the only issue; and those looking for a mortgage won’t need to worry about fitting into government requirements. And this can actually provide some flexibility for those looking to get a home loan.
It can be very difficult to find the silver lining within rising mortgage rates. After all, what’s good about paying more for your mortgage than you have to? The fact that the mortgage rules that are in place today are already there – and you don’t need to be worried about being blindsided by them again.