New Mortgage Rules Announced
New Mortgage Rules Announced
Finance Minister Jim Flaherty announced some changes to mortgage rules that will come into force on March 18, 2011.
1. The maximum amortization period is now 30 years (down from 35 years) for government-backed insured mortgages, when the down payment is less than 20 percent.
2. The maximum amount that can be borrowed when refinancing a mortgage is now 85 percent the value of the home, down from 90 percent.
3. The government will no longer provide insurance backing for home equity lines of credit.
Key Implications
- The withdrawal of HELOC insurance may cause some substitution toward more traditional mortgages, but very few financial institutions insure their HELOC portfolios. As such, the change is unlikely to register significantly on the aggregate lending scale.
- In terms of monetary policy, this helps take some pressure off the Bank of Canada (BoC). With all the talk about the non-sustainable pace of household debt accumulation, there was speculation about whether or not the BoC would consider hiking interest rates for reasons not directly related to its inflation-targeting mandate. Such speculation can be put to rest for the time being, and we can go back to focusing on the inflation outlook.
Market is still active toward all good real estate deals which makes sense from investment prospective and first time buyers .
