New Mortgage Insurance Rules
The Honourable Jim Flaherty, Minister of Finance has announced adjustments to the rules for government-backed insured mortgages in an effort to support the long-term stability of Canada’s housing market.
“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,” said Minister Flaherty. “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 new measures:
- Reduce the maximum amortization period to 30 years from 35 years for new government-backed insured mortgages with loan-to-value ratios of more than 80 per cent.
- Lower the maximum amount Canadians can borrow in refinancing their mortgages to 85 per cent from 90 per cent of the value of their homes. This will promote saving through home ownership and limit the repackaging of consumer debt into mortgages guaranteed by taxpayers.
- Withdraw government insurance backing on lines of credit secured by homes, such as home equity lines of credit, or HELOCs.
The adjustments to the mortgage insurance guarantee framework will come into force on March 18, 2011. The withdrawal of government insurance backing on lines of credit secured by homes will come into force on April 18, 2011.
While the federal government looks to curb borrowing by imposing these new rules, economists have added that the Bank of Canada may have to raise its key interest rate sooner rather than later in order to follow up on these efforts.