Canadian Finance Minister Jim Flaherty expressed his concerns
about the impact that an increase in interest rates could have on family
budgets in the coming year. With Canadians adding on to their credit card bills
with Christmas and New Year expenses, 2011 is a year for introspection for those
holding a significant amount of mortgage debt.
Flaherty said in an interview
that he was worried about the record debt levels held by Canadians, most of
which is mortgage debt, as well as the increasing number of home equity loans.
He admitted that carrying more debt in a low interest climate made sense and
that many Canadians have invested in homes, taking advantage of the rock bottom
rates. But he added that the inevitable rise in interest rates in the near
future may leave borrowers with some problems as far as their debt repayment
abilities are concerned.
Flaherty said that home buyers would do well to view their
homes as something that should be paid off quickly as opposed to purchasing as
much house as they can possibly afford. This was the approach taken by our
parents, who were more concerned about paying off debt as quickly as possible
and building home equity in the process, he said.
The minister added that he was considering tightening
mortgage rules, though he wouldn’t specify if this would be in the form of
larger down payments or a cap on amortization at 25 years. Flaherty faces a
challenging year with the forthcoming budget aiming to restrain government
spending, though he said that a slash in education and health budget
allocations to provinces was out of the question.
