The new mortgage rules recently announced by the Government of Canada thru CMHC left a few lingering questions. For the most part the new rules raised the bar for most borrower classes with an eye toward making it somewhat harder to get mortgage financing. Speculators were hardest hit as the Down-payment threshold for CMHC coverage for non-owner occupied dwellings was lowered to 20%, speculators and pure rental properties will now require minimum 20% equity. Re-financers were also affected as the maximum equity they will be able to access from their homes will be lowered to 90% of appraised value (from 95%).
The most bothersome question was for new home buyers who were interested in a Variable Rate Mortgages (VRM); Lenders usually used their current 3 year rate to determine if a client was able to deal with a potential rate increase in their VRM mortgage. The Federal Government indicated that they preferred the use of a Standard Rate and they have recently announced that the Bank of Canada will announce a 5 Year Rate based on chartered bank Posted Rates weekly on their website that will be the benchmark for VRM eligibility.
This should close the circle on this round of tinkering with Mortgage Eligibility in Canada. For the most part these changes are prudent and effective without killing the Housing market.