Update: For the latest mortgage rules tightening announcement on June 21, 2012 – click here
Canada has a “prudent mortgage market and responsible lending practices…our governments ongoing monitoring and sound supervisory regime along with the traditionally cautiously prudent approach taken by Canadian financial institutions to mortgage lending has allowed Canada to maintain strong and secure housing and mortgage markets. This has also allowed Canada to avoid housing bubbles witnessed elsewhere,” said Mr. Flaherty at a live televised announcement earlier this morning.
The following additional measures were implemented to tackle the issue of burgeoning household debt:
- Mortgage amortization periods will be reduced to 30 years from 35 years (for high-ratio loans)
- The max Canadians can borrow to refinance their mortgages will be lowered to 85% from the current 90%
- The government will withdraw its insurance backing on lines of credit secured on homes (HELOCs)
There were no changes to the minimum downpayment, nor any changes to qualifying condominium buyers as previously speculated.
Adjustments on amortization and refinancing limits come into force on March 18. Government backing on HELOCs will be removed as of April 18.
Do you think this will cause a surge in buyers with the deadline two months away, or has the buyer pool already been exhausted?
Previous Mortgage Rule Changes
In October 2008, the Government adjusted its minimum standards for the mortgage insurance guarantee framework, including:
- Fixing the maximum amortization period for new government-backed insured mortgages to 35 years.
- Requiring a minimum down payment of five per cent for new government-backed insured mortgages.
- Establishing a consistent minimum credit score requirement.
- Requiring the lender to make a reasonable effort to verify that the borrower can afford the loan payment.
- Introducing new loan documentation standards to ensure that there is evidence of reasonableness of property value and the borrower’s sources and level of income.
In April 2010, the Government took additional steps:
- Requiring that borrowers meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term.
- Lowering the maximum amount Canadians can withdraw in refinancing their mortgages to 90 per cent from 95 per cent of the value of their homes.
- Requiring a minimum down payment of 20 per cent on non-owner-occupied properties purchased for speculation.