After months of warnings from Mark Carney, Governor of the Bank of Canada, and the federal government about the high debt-load of Canadians and concern about the consequences of inevitable interest rate increases, the federal government has tightened the rules for government-insured mortgages. Probably just as well, since figures from Statistics Canada show that by the third quarter of 2010, the debt of Canadian households had reached 148 percent of disposable income.
Here are the changes announced by Canadian Finance Minister Jim Flaherty, saying the federal government would "not facilitate excessive debt assumption by some Canadians at very low interest rates."
Effective March 18, 2011
- the maximum amortization period for new government-backed insured mortgages will drop to 30 years from 35 years
- the maximum amount Canadians can borrow in refinancing their mortgages will be lowered to 85 per cent of the value of their homes from 90 per cent.
Effective April 18, 2011
- the government, through the Canada Mortgage and Housing Corporation (CMHC), will no longer insure home equity lines of credit. This means that financial institutions will have to assume the risk for defaults, and will likely tighten up the eligibility requirements.
Photo: Mortgage Payment
Christine Balderas / Getty Images
Housing Finances in Canada
2008 Changes to Canadian Government-Guaranteed Mortgages
Mortgages in Canada
Housing Finances in Canada
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