Who makes the Rules?

Yesterday there was an article in the Globe and Mail stating that Finance Minister Jim Flaherty says he stand ready to intervene in the housing market again.  He says that he’s watching the market closely. Both he and Bank of Canada Governor Mark Carney have been urging consumer to get a handle of their debts and not allow low interest rates to entice them into taking on more credit than they can handle.

“We have been cautioning Canadians for some time that they need to be prepared to have higher interest rates in the future and be aware of the affordability issue that that may create for some Canadians, not to assume that mortgage interest rates will remain low for a long period of time,” Mr. Flaherty said Tuesday. “So we all have to be cautious in our financial planning.”

Recently I was reading the Canadian Housing Observer 2011 that is published by the Canadian Mortgage and Housing Corporation, they state that personal lines of credit have been growing consistently at double-digit average annual rates. They have increased at higher growth rates that any other sub-component of household debt held by chartered banks.

In 2010 mortgages represented about 58% of total household debt and 42% was consumer credit.  While this shows that mortgages are a larger part of the debt households have why is it that it seems like the only focus the government has is on the mortgage market?

The mortgage market has had 2 major tightening’s in the last couple of years but we have not seen any changes to the consumer credit side.  The only change we have seen in the same time frame is the statement that is now on your credit card bills, I checked mine this morning and it has an “Estimated Time to Pay”, it has to state how long it will take to pay off the balance if you make the minimum payments.

Granted we are seeing the lowest mortgage rates in history and the Government did not know we would be here when they made the first set of changes but why is it that they feel they need to continually make changes to this portion of the market while not addressing the consumer debt area at all?  What strikes me funny is that at least with mortgages there is a property secured against the loan were as with lines of credit and debts there is nothing securing them.

So maybe it is time that the Government also look at the consumer debt side since it does make up 42% of the debt load people carry and the rules for that area have not been tightened.

If you are worried about your debt load be proactive and put a plan in place!

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