Ottawa tightens mortgage rules

Ottawa tightens mortgage rules

Finance Minister Jim Flaherty announced a second tightening of mortgage rules in the past 12 months as Canadian household debt became a growing concern at the end of 2010 and historically low interest rates continued to persist.
 
The three main changes are maximum amortization periods will be reduced to 30 years from 35; the refinance limit of a home’s value will be lowered to 85 per cent from 90 per cent; and the government is also withdrawing insurance on home equity lines of credit.
 
The new rules will be effective March 18.
 
“Canada’s well-regulated housing sector has been an important strength that allowed us to avoid the mistakes of other countries and helped protect us from the worst of the recent global recession,” Flaherty said in a press conference on Monday January 17. “The prudent measures announced today build on that advantage by encouraging hard-working Canadian families to save by investing in their homes and future.
 
The MortgageBrokerNews.ca community was vocally upset in past news tips that Ottawa may restrict mortgage lending further, and a majority expressed Harper and Flaherty were tackling the wrong debt issues. Many brokers feel looser rules around credit cards and auto financing need to be re-examined.

The mortgage rules announcement is also two days before Gary Mauris, Dominion Lending Centres president, is set to meet Flaherty for a pre-budget consultation roundtable in Regina, Sask.

Peter Kinch, owner of a mortgage brokerage in British Columbia, said he expects the measures to put a rush on the real estate market as buyers seek to get in before the deadline.
 
It's similar to last year's changes by Flaherty to the borrowing rules, he said. Whether or not they have an effect, on borrowing, many Canadians are likely to push real estate activities up to avoid the changes, Kinch said. "It’s not really what these changes will do, but what the perception will be," he said.
 
Kinch said he was surprised that Flaherty acted so quickly this winter, but suspects there's a hidden message in the mortgage rule changes -- rate hikes are coming. This is a way for Flaherty to prepare Canadians to be more responsible with their borrowing ahead of the rise in borrowing rates, said Kinch.
 
"He’s clearly trying to cut back on Canadians using their houses as ATM machines," he said.
15 Comments
  • Elfie Hayes 2011-01-18 2:15:01 AM
    Last week many of us commented on and shared our insights about Harper making it tougher to get a Mortgage. Who knew we'd open our news feeders to see this announcement on what is said to be the "Most Depressing Day of the Year".

    Thanks Ottawa for making sure it is!

    I'm sorry that Canada's mortgage insurers didn't take it upon themselves to make necessary changes to borrowing if they are concerned, rather than putting it in the hands of the Government AGAIN!

    The bigger issue here as I see it, is consumer debt. While interest rates fell through the floor credit card companies did not pull back at all.

    I scratch my head and ask why this segment of the financial world is left untouched by government rules or the hardship that the recession has caused so many Canadians. I believe they have actually had great benefit from a time that has seen financial downturn in our economy.

    I predict these mortgage rules will cause greater fallout for the Self-employed. They will surely be further penalized as they were with the last round of changes.

    Has anyone heard that the job losses have brought greater numbers of Canadians into Self-employment? They're willing to take a risk and work the long hours to be sure they have an income. Where will this lead for them. I bet we won't have to wait long to find out!

    I appreciate this forum to voice my own opinion about an industry that I am passionate about. Remember this post is just that, my opinion!

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  • LB 2011-01-18 4:44:09 AM
    Break it down to basic necessity: everybody needs a place to live (rent or own) but not everyone needs a credit card. Tackle the real issues and quit using the real estate sector for political manoeuvres.
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  • Leaders Step Up 2011-01-18 5:43:58 AM
    Leaders in the mortgage industry need to step up and defend our interest. If our industry is more cohesive, co-ordinated and more concise messaging about how we could be self regulated for the benefit of the consumer, then we may turn things around. Recent CAAMP survey is a wake up call to the industry to get your act together. The banking and investment industry are self regulated and enjoy continue growth and success.
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