So the big news today is that Ottawa is going to finally tighten up on mortgage rules. According to the Globe and Mail newspaper the government will announce tomorrow that CMHC will not longer support mortgages with amortization periods longer than 30 years.
The newspaper also reports that Finance Minister Jim Flaherty will announce that the government is going to take action to reduce the rapid rise in home equity lines of credit by clamping down on the insurance that CMHC offers to the lines of credit. Basically it will be withdrawn.
Finally Ottawa will also reduce how much Canadians can draw on their home equity. Last February the Finance Department announced that it would lower the maximum amount Canadians could withdraw in refinancing their mortgages to 90% from 95% of the value of their homes. It is now expected to reduce that maximum to 85% from 90%.
Says the Globe:
- "Ottawa's recent actions have been moving policy in the opposite direction that it was headed prior to the U.S. subprime crisis. As the subprime crisis morphed into an economic recession, the federal government took steps to make it easier and cheaper for banks to lend mortgages in Canada in order to keep credit flowing and the economy strong. In 2006, the maximum amortization period in Canada was extended to 40 years from 25. Now the government is trying to cool a market that it helped to fuel."
It will be interesting to watch the impact the changes have.
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