Today the Globe & Mail Report on Business reported some events which could affect our clientele. Grant Robertson writes that the Head of the Office of the Superintendant of Financial Institutions (OSFI) suggests that the situation now with home equity loans (borrowing up to 85% of the assessed value of your home) is “a potentially dangerous mix", and urged banks to maintain prudent lending practices.

The situation suggests that banks may loosen some of their standards to sell loans in an environment where loan demand is decreasing.

A key worry for the OSFI is the prospect of a worsening economy and rising unemployment, coupled with a drop in housing prices. Naturally this would have a disastrous impact on Canadians who have large amounts of money borrowed against their homes.

If lending goes up and property values go down, homeowners could find themselves in a bind. The Department of Finance took steps last year to reign in some high percentage lending practices by shifting secured lines of credit to a max of 85% from 90% and increasing the minimum cash down payment from 5% to 10% - both highly sensible changes.

What this all means is that if you are thinking of applying for a secured line of credit, you might want to do it now. I’m not suggesting you draw against the line, only that you put it in place.

If the information going around lately about home prices is worrying you (as a homeowner) I would only be seriously concerned if I lived in Toronto or Vancouver, because ”Whatever goes up (too fast) will come down (just as fast)”. Our market in the West Island is secure until interest rates start to climb. I suggested 18 months ago, when everyone was worrying about increasing rates, that I couldn’t see it happening. We were frightened into borrowing money at fixed rates over 4% when we should have borrowed at floating rates around 2.25%. I don’t foresee any shift but down - YES, I mean less than 1% (present Bank of Canada overnight lending rate).

As always, for all your mortgage financing questions, give us a call. We are at your service and deal with many different lenders to get you the best mortgage for your situation.

Cheers, John Deakin