Finance minister tightens mortgage rules
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Finance Minister Jim Flaherty is tightening mortgage rules to crack down on speculators and discourage homeowners from taking on too much debt.
He is responding to growing concerns that Canada’s housing market is overheating, although he stresses that there is no bubble in Canada’s real-estate market – yet.
“There’s no compelling evidence of a housing bubble, but we’re taking proactive, prudent, measured and cautious steps today to help prevent a housing bubble,” Flaherty said on February 16.
The finance minister says all borrowers will need to meet stiffer criteria to take out mortgages. In order to qualify for an insured mortgage, borrowers will have to meet the standards for a five-year fixed-rate mortgage – up from the current standard of three years.
He’s also raising the down payment that borrowers must pay for speculative investments. If prospective home buyers want to purchase a property where they will not be living, they will have to come up with a 20 per cent down payment.
And he’s imposing tighter restrictions on how much money people can borrow against their houses. Instead of being able to borrow 95 per cent of the value of their property, the limit will now be 90 per cent.
The new rules are expected to come into force on April 19.
