The Bank of Canada held their lending rate steady today, stating “the cumulative effects of the persistent strength in the Canadian dollar and Canada’s poor relative productivity performance are restraining this recovery in net exports and contributing to a widening of Canada’s current account deficit to a 20-year high.” This along with “a significant source of uncertainty” from the worldwide market is keeping our Prime rate at 3%.

At the same time, measures introduced Monday by Finance Minister Jim Flaherty to clamp down on household debt, by making it harder for people to take on more obligations than they can afford, will likely give the central bank more flexibility to wait until it makes sense to raise rates throughout the economy rather than doing so to discourage a small subset of borrowers.

Governor Mark Carney hinted that if he could raise rates he would. Most economists are expecting the next increase to come in the second quarter.

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The Honourable Jim Flaherty, Minister of Finance, and the Honourable Christian Paradis, Minister of Natural Resources, today announced prudent adjustments to the rules for government-backed insured mortgages to support the long-term stability of Canada’s housing market and support hard-working Canadian families saving through home ownership.

“Canada’s well-regulated housing sector has been an important strength that allowed us to avoid the mistakes of other countries and helped protect us from the worst of the recent global recession,” said Minister Flaherty. “The prudent measures announced today build on that advantage by encouraging hard-working Canadian families to save by investing in their homes and future.”

“The economy continues to be our Government’s top priority,” continued Minister Paradis. “Our Government will continue to take the necessary actions to ensure stability and economic certainty in Canada’s housing market.”

The maximum amortization for insured mortgages is now 30 years, down from 35.

The maximum loan to value for refinances is now 85%, down from 90%.

They have withdrawn government insurance backing on lines of credit secured by homes, such as home equity lines of credit, or HELOCs.

The previous changes made in 2008 did not affect the market too drastically. I think these changes will strenghten our ecomony more and secure it down the road.

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