Changes begin to Canada’s mortgage insurance guarantee framework

Two months ago, Jim Flaherty, Minister of Finance, announced that Canada would change its “mortgage insurance guarantee framework” to prevent over-speculation in its housing market. The new rules went into effect yesterday. These rules:

  1. Require that all borrowers meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term. This initiative will help Canadians prepare for higher interest rates in the future.
  2. Lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90 per cent from 95 per cent of the value of their homes. This will help ensure home ownership is a more effective way to save.
  3. Require a minimum down payment of 20 per cent for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation.

Flaherty referenced the recent financial crisis as motivation for taking these proactive steps.

CBC News reports on the changes in “New mortgage rules take effect” and describes the current strength in Canada’s housing market.

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