Ottawa tightens mortgage lending rules
Published by mMC Admin on February 16, 2010
Ottawa Tightens Mortgage Lending Rules
Finance Minister Jim Flaherty announced tighter lending standards for mortgages today, citing Canada's 'healthy' housing market as the main reason. To prevent 'negative trends from developing' he felt measures needed to be put in place to ensure Canadians weren't taking on more debt than they could handle.
"There are no definitive signs of a housing bubble," Mr. Flaherty said. "We think we're being pro-active in the three steps we're taking today."
Under the new rules, borrowers must meet the standards for 5 year mortgages regardless of the rate and term they are actually applying for.
The government is also lowering the maximum loan to value borrowers can take out on a refinance from 95% to 90%, and requiring a 20% downpayment to qualify for government backed mortgage insurance on 'speculative' investment properties.
In a release, the finance department indicated that the three new changes to the mortgage insurance guarantee rules are intended to take effect April 19, 2010. In reference to the tightening of re-financing rules, Mr. Flaherty said this will encourage Canadians to build equity in their homes instead of tapping that equity as a source of cash.
"This will discourage the kind of mortgage refinancing that can create unsustainable debt levels as interest rates go up. We are encouraging people to build equity over time, using home ownership as an effective way to save, rather than as a vehicle for quick cash," he said.
Found in: mortgage downpayment First Time Homebuyers Lending