Changes To Canadian Mtg Rules

On January 17, Finance Minister Jim Flaherty brought down the hammer in a pre-emptive strike of sorts as a result of the increasing concern over the growing Canadian household debt and attempting to support long-term stability in the housing market. Flaherty said at a news conference: “"The main reason we're taking the action is for the longer term, that we avoid even the beginning of the development of the kinds of issues in some other countries that have been very damaging to families.”

As of the 17'th there are three new changes to the rules for government insured (default insured) mortgages. 


The three changes to default insured mortgages are as follows:

1.  Lowering the maximum amount consumers can borrow when refinancing their mortgages
   This change will lower the maximum mortgage amount to 85% of the appraised value of the property from the current 90%. This change will help to promote savings in homeownership and ensure that homeowners don’t become overextended by using all the equity they have built up in their home when refinancing.(effective March, 2011)
2. Reducing the maximum amortization period for new government insured (default insured) mortgages. The maximum amortization for all new default insured mortgages will be reduced from 35 years to 30 years. This change will help reduce the total borrowing costs for the consumer. (effective March, 2011)
3. The federal government will be withdrawing its' support of Home Equity Lines of Credit, (HELOC). (effective April 18, 2011)

This is the second change to mortgage lending rules in the last two years- showing an aggressive stance from the government not to leave household debt to chance. There is speculation that interest rate hikes are in the future, and the government is acting on concerns over what higher interest rates could mean for Canadians in terms of managing their own debt load, especially as debt levels are currently growing beyond incomes.