Finance Minister Jim Flaherty Tuesday announced tighter lending standards for mortgages, saying that while the housing market is healthy and there’s no solid evidence of a bubble, the moves are needed to “help prevent negative trends from developing.”
1. Under the new rules, all borrowers will need to meet standards for five-year fixed-rate mortgages regardless of whether they’re seeking a loan with a lower rate and shorter term.
2. the government is lowering the maximum amount Canadians can withdraw when refinancing to 90 per cent of the value of their homes, from the current 95 per cent….; 3. requiring a 20 per cent down payment for government-backed mortgage insurance on “speculative” investment properties.
“There are no definitive signs of a housing bubble,” Mr. Flaherty said. “We think we’re being proactive in the three steps we’re taking today.”
“This all leads to short-term price scrambling,” Mr. Holt said in an interview, noting that the Harmonized Sales Tax due to take effect in Ontario and British Columbia on July 1 is already causing some buyers to rush into the market in a bid to close deals in advance. “It could really heat up in the near term and then cool off in the back end of the year. With the HST in Ontario and B.C. and these changes, they have dramatically altered the home-buying decisions of Canadians.”
The three new changes to the mortgage insurance guarantee rules are intended to take effect on April 19, according to a statement.