Canada’s housing market dropped for the second consecutive month in June. Personal finance firm Worth Unlimited explains why this may be a good thing.
According to the Wall Street Journal, Canada’s housing market is beginning to show signs of cooling. A recent report by the Canadian Real Estate Association showed that home sales fell by 1.3% in June, marking a second month of consecutive decline. The figures also present the first year-over-year drop since April 2011.
While a drop in overall home sales may seem like a bad omen to some, don’t start trading cash for gold just yet. Many experts believe that the recent lull in Canada’s housing market is nothing like the American housing crisis of 2008. In fact, Canada’s lull is likely a direct result of a government policy that aimed to prevent such a crisis.
Today, most people agree that the American housing crisis was largely a result of predatory lending. Prior to the recession, banks were awarding hefty mortgages to individuals who had no realistic way of making payments. There are many who believe that banks were engaging in such practices with malicious intent – collecting interest on loans that would end in default.
In order to curtail such predatory practices, Canadian officials recently set new mandates that limited the amount of money banks can loan to citizens. Last month, finance minister Jim Flaherty reduced the mortgage amortization period from 30 years to 25 years. He also lowered the amount of home equity Canadians could borrow against, dropping it to 80% when it was previously 85%.
Although these changes have resulted in fewer sales, they are ultimately better for the consumer. In America, interest on loans often dwarfs the size of the original loan amount. In fact, Americans with 30-year mortgages often pay more than double their home’s original value. By reducing the mortgage period by five years, Canadians are saving a pretty healthy chunk of change.
While US officials have yet to implement similar restrictions, there are measures Americans can take to lower the overall cost of their homes. Worth Unlimited, a personal finance program, enables individuals to identify the fastest way to reduce their mortgage debt. By working with Worth Unlimited, consumers can shorten the length of their mortgage and save tens of thousands of dollars.
Although it seems as though we are finally starting to crawl out of the recession, we’re not out of the woods yet. There’s no room for unrealistic mortgage payments in the new world economy. If Americans truly want a stable market, we’re going to need to manage our debt.
Worth Unlimited is a personal finance firm that specializes in debt management. To date, the company has provided consumers with over $25 billion in projected wealth accumulation.