OTTAWA - Amid warnings about Canadian household debt levels and a possible housing bubble, Finance Minister Jim Flaherty said Tuesday the federal government would make it tougher for people to get a mortgage. [Paul Vieira, Financial Post ]
He said at an early Tuesday morning media conference that Ottawa would require all borrowers meet standards for a five-year fixed-rate mortgage, even if the buyer wants a variable rate mortgage. That is the key move announced Tuesday. Other rule changes unveiled would affect people looking to refinance their mortgages - lowering the maximum amount that can be withdrawn to 90 per cent from 95 per cent - and place a 20 per cent minimum down payment for government-backed mortgage insurance on non-owner-occupied properties.
But the Minister said the changes were not meant to stop a possible housing bubble, as some warned was upon us. "There's no clear evidence of a housing bubble, but we're taking proactive, prudent and cautious steps today to help prevent one," Flaherty said. "Our government is acting to help prevent Canadian households from getting overextended." [ read more ->]
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1. All borrowers must meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term;
2. The maximum amount one can withdraw in refinancing their mortgage will be reduced to 90% from the current 95% of the value of one's home;
3. Non-owner occupied properties will require a minimum down payment of 20%.
There were no changes to down payment requirements or length of amortizations for owner-occupied residences.
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