This and That: Tightening mortgage rules, risk taking and more…
A 2×4 to the Housing Market?
Finance Minister Jim Flaherty announced steps to cool the housing market by (1) reducing the maximum amortization to 25 years from 30 years (2) lowering the maximum refinancing amount to 80 percent and (3) reducing the ratios used to calculate mortgage affordability and (4) limiting mortgage insurance to homes priced under $1 million. You can read the news release and links to more information here.
Concurrently, the OSFI announced that the maximum Loan-To-Value of Home Equity Lines of Credit (HELOCs) will be lowered to 65 percent (from the current 80 percent). HELOCs will continue to remain revolving lines of credit and will not require amortization. If you currently have a HELOC and are close to the 80 percent limit, do not worry (though you may want to think about paying it down to a comfortable level): the HELOC rules will not apply retroactively.
The Biology of Risk Taking
John Coates, the researcher behind these findings also shared his views in an interview with the CBC’s Anna Maria Tremonti.
Buy-and-hold dies again
Gordon Pape says that “to a degree, it’s true” that buying-and-holding index funds is a dead idea. So, what should investors do? Mr. Pape suggests looking at stock charts, companies with “industry leadership”, strong balance sheets, good dividend record and relative strength in bad markets. One wishes picking winning stocks were so easy.
The Importance of Rebalancing