New Mortgage Rules January 17, 2011
The federal government is taking steps that will affect consumer borrowing make it harder to take out a home mortgage.
It's the third time that the finance minister has acted to restrain credit in the past three years.
The new rules reduce the maximum amortization period to 30 years from 35 for new, government-backed mortgages with a down payment of less than 20 per cent; lowering the amount you can borrow on your first home.
Ottawa will also lower the limit on how much money you can borrow using your homes as equity to 85 per cent of the total value from 90. And it will no longer insure lines of credit secured on homes as if they were mortgages, which could affect the way your bank decides if you qualify for a loan.
However Flaherty made clear there is not a debt crisis in Canada at the moment. "We are responding to a situation that could develop," he told a news conference, "and we want to avoid that." But he said he was concerned that some Canadians were getting stretched and would feel the pinch when interest rates eventually rise.
Fortunately down payment requirements have not been touched which would have had a more dramatic impact on people's ability to finance their first home.
This change in my opinion will affect the average Canadian’s ability to obtain a mortgage disqualifying some first time home buyers from owning a home. We saw that happen last year.
The federal government has to be careful when they create problems for Canadians buying and selling houses as we had seen happen all across the country in 2010. Real Estate is the single largest contributor to the economy and by slowing it down it can negatively affect the whole economy.