Toronto Star - February 16, 2010 OTTAWA — New federal measures meant to cool the red-hot housing market will make it more difficult for homebuyers to qualify for government-backed mortgages, Finance Minister Jim Flaherty acknowledged this morning.
Some buyers will have to settle for less expensive houses or a bigger mortgage as a result of the rule changes brought in by the Conservatives. To give the financial industry time to adjust, the measures take effect April 19.
While insisting that the housing market is healthy, Flaherty moved to curb what he characterized as speculative purchases of multiple condominium units and risky house buying.
“There’s no clear evidence of a housing bubble, but we’re taking proactive, prudent and cautious steps today to help prevent one,” Flaherty told the media.
The new rules will:
- Require all homebuyers to meet the higher borrowing qualifications for a five-year fixed rated mortgage even if they are seeking a mortgage with a lower interest rate and shorter term. This means that thousands of buyers will have to provide a higher down payment for the house they want to buy or settle for a less costly home.
- Lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90 per cent of the value of their homes. The maximum is currently 95 per cent. Flaherty said this will discourage people from using their homes as “ATM machines.”
- Require a minimum down payment of 20 per cent for government-backed mortgage insurance on non-owner-occupied properties “purchased for speculation.” The current minimum down payment for a residential property is 5 per cent. This measure is meant hold down speculative investments in non-owner-occupied residential properties involving one to four living units.
Flaherty said the government wants to take the steam out of fast-rising home prices and ensure that Canadians are not taking on mortgages they won’t be able to afford once interest rates move up from their current low levels as the recession ends.