Monday, December 12, 2016

Why?....... Is it okay that credit card limits just keep going up?

The background:

The Minister of Finance announced on Monday October 5th that changes are being made to the Canadian mortgage rules, effective October 17,2016. The new rules will impact high ratio buyers - those with less than 20% down payment.  The most commonly discussed and concerning rule change, was the new qualifying rate for buyers.  This is one item listed under the "Stress Test".  It means that Canadians must now qualify at benchmark rate which today is 4.64%.

The government made this change to protect the financial security of the consumer, however; I firmly think that everyone should speak to their local council and express their concerns about the segments of lending - ie - car loans or credit card debt.

Where am I going with this?.......................................................................................

I agree that Canadian debt levels are at record highs and we need to tighten the purse strings so to say!  This is to ensure that we are not over extending ourselves to the point where we can't make the payments on our mortgage, should the rates rise which inevitably they will.

So why has our government not cracked down on other segments of lending?

We need to tell our government that Automobile loans, Credit Card loans and Lines of credit need to be addressed immediately to ensure that this "Stress Test" to the mortgage segment of lending can work.

I had a client send me this picture and ask me why?

I agreed to leave the client unnamed for this article, but he always pays his bills on time and recently has increased his credit card activity which is why a credit card increase is being offered to him.  However; this client earn $80 000.00 per year and has a family of four, a mortgage, 2 vehicle loans and if he used all this credit he would be using 142% of his income - it is impossible for him to ever get out of debt.

So Why?  

Why is our government not cracking down on the high limits being offered to Canadians?

Why are we only cracking down on mortgages which is the one debt that can create an asset for you over time?

I firmly believe that changes need to be made and I am not against the government changes, but they need to come with a well thought out plan.  If the "Stress Test"  as we refer to it now, is to be effective, which means to protect Canadians financial security then our government should have a plan in place to attack all aspects of debt.



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