Starting in the 1990s, changes to the mortgage insurance guarantee scheme introduced by the federal government gave Canadians access to new mortgage products. These included low down payment loans and extended amortization loans. These new financial products have made it possible for younger Canadians with limited savings and less affluent Canadians to buy a property on credit, something that would previously have been impossible. Hybrid loans, in which a line of credit accompanies the mortgage, are another example.
In the light of this research, we can see that buying a property is a complex exercise that requires first-time buyers to assimilate a great deal of information in a short space of time. Moreover, for banking neophytes, the expressions used to define the characteristics of mortgage products are difficult to understand.
In addition, a survey carried out by Environics on behalf ofOption consommateurs shows that consumers aged 18 to 29 and households earning less than $60,000 a year find it harder than other population groups to understand the features of these products. With this in mind, Option consommateurs believes that financial education should be promoted especially for these groups, who now have easier access to mortgage credit.
Canadian consumers have been keen to take advantage of the credit available through new mortgage products. One of the consequences of this craze is that their debt levels have soared. Whereas they had borrowed a total of $250 billion in mortgage credit in 1990, this figure had risen to almost $800 billion by 2007.
While mortgage credit is helping to increase the number of Canadian homeowners, their indebtedness makes them more vulnerable to rising interest rates. In our view, this heightened vulnerability raises questions about the objective of public housing policy. In other words, should public policy continue to promote home ownership by increasing access to mortgage credit? This is a question to which Option consommateurs has not yet found an answer.
