Tighter mortgage rules In Canada
Jim Flaherty, who had insisted it absolutely was up to commercial banks to simply accept lead on mortgage lending, on Thursday took that action himself - decreasing the amortization period for government-backed mortgages and limiting hel-home equity loans, among other measures.
“The government doesn’t necessarily need to be, at the end of the day, inside the mortgage-insurance business,” Mr. Flaherty told reporters. “But we’re in the industry, so we need to ensure the exposure to the taxpayers of Canada is reasonable.”
Mr. Flaherty said he wished to “avoid the kind of issues that have happened a long way away in recent years. And I’m satisfied we’re and our companies are OK.
“But I think there’s a prophylactic function for government relating to this with respect to insured mortgages and it’s our responsibility to try to be in front of things and act – and act in the measured way, hearing the marketplace. And I happen to be hearing the market and, to tell the truth, I don’t like a few things i hear, particularly in the condo market.”
Thursday’s announcement marked the next time in four years that Ottawa went this path to go over-zealous borrowing by homeowners, lots of whom might not be capable of carry their debt load.
The newest rules, which work July 9, will dsicover the maximum amortization period for government-insured mortgages fall to Two-and-a-half decades from 3 decades. The limit for borrowing in the value of a home drops to 80% from 85%, because the maximum gross-debt ratio is bound at 39% and also the total debt-service ratio will probably be 44%.
The biggest surprise, however, will be a new rule to limit government-backed mortgages to homes purchased for less than $1-million.
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