January 17, 2011 - Federal Finance Minister Jim Flaherty announced tighter mortgage rules on Monday to address concerns over high Canadian household debt.
"In 2008 and again in 2010, our government acted to protect and strengthen the Canadian housing market," Flaherty told a news conference in Ottawa. "We continue to do so today."
Flaherty unveiled three main changes:
- The maximum amortization period for a government-insured mortgage was lowered from 35 to 30 years.
- The upper limit that Canadians can borrow against their home equity was lowered from 90 per cent to 85 per cent.
- Government insurance backing on home equity lines of credit, or HELOCs, has been removed.
The first change is likely to have the largest impact. Buyers who purchase a home with a down payment less than 20 per cent of the value of the home are required to purchase government-backed mortgage insurance through Canada Mortgage and Housing Corporation.
"This measure will significantly reduce the total interest payments for Canadian homeowners," Flaherty said.