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Canadians Are Paying Off Mortgages Quickly – So Is Ottawa’s Crackdown Really Necessary?

Canadians end up paying off their mortgages in about two-thirds of the time originally intended, according to a new survey which questions whether Ottawa’s crackdown on the real estate market is needed.

A report by the Canadian Association of Accredited Mortgage Professionals released Wednesday paints us as a very conservative lot not in need of increased government regulation.

The group notes of the mortgages paid off in 2010-2013, the original amortization length was on average 17.9 years but ended up with an actual amortization length of 11.7 years.

Despite the fact Canadians pay off their mortgages quickly, the federal government has continually cracked down on amortization of insured mortgages it backs. The length of amortizations – a longer amortization lowers monthly payments and allows consumers to qualify for larger mortgages at the expense of paying more interest – has been dropped from a high of 40 years to the present 25 years.

Consumers may have gotten the message. Amortization lengths have shrunk since Ottawa started dropping the maximum length. From 2005-2009, mortgages paid off during the period had an average original amortization length of 19.9 years compared with an average actual amortization length of 12.8 years.

Now CAAMP is arguing that changes to government rules have actually gone too far and have resulted in a 15% decline in new home construction this year from highs reached in 2011 with a further 25% to 30% predicted by 2015, which would cost 150,000 jobs.

Read the entire article here: http://business.financialpost.com/2013/05/22/canadians-paying-off-mortgages-quickly-so-is-ottawas-crackdown-really-necessary/?__lsa=3437-f1c9