MONTREAL: Canada’s Finance Minister Jim Flaherty yesterday announced tighter mortgage lending rules amid warnings of rising household debt and an overheated housing market.
The measures will make it harder for Canadians with limited savings to buy homes or obtain loans.
Flaherty said the government would reduce the maximum amortization period for a government-insured mortgage from 30 to 25 years, a move that would increase monthly payments for homeowners but reduce the total amount of interest paid on a mortgage.
The minister also said the changes would lower the maximum Canadians could borrow against their homes, from 85 percent to 80 percent of its value, and that the government would not back mortgages of homes costing more than C$1 million.
The measures, which take effect July 9, mark the fourth time the Conservative government has tightened mortgage rules since 2008.
“The adjustments we are making today will help (Canadians) realize their goals, build on the previous measures we have introduced to keep the housing market strong, and help to ensure households do not become overextended,” Flaherty said.
The minister said the reductions to the maximum amortization period since 2008 would save a typical Canadian family with a $350,000 mortgage about $150,000 in borrowing costs over the life of that mortgage.
Canada’s housing market has surged since the recession, fueled by record low mortgage rates — unlike the United States, where home sales and values have fallen since 2007.
Bank of Canada governor Mark Carney recently warned that Canadians holding record high debts — defined by Statistics Canada as 153 percent of disposable income — are “highly vulnerable” to economic shocks.
Canada tightens mortgage rules
