The Finance Minister of Canada, Jim Flaherty tightens mortgage rules again to prevent a debt crisis in the housing sector.
This is the fourth time that Jim Flaherty, the finance minister of Canada, has made a move to further tighten mortgage rules. The federal government took this initiative to decelerate the accumulation of housing debt on the Canadian economy and to stabilize the overall financial system.
These changes, that took effect from the 9th of July this year, will restrict up to five percent of Canadians from qualifying for a home loan, who were previously thinking of buying real estate. The rule altered the maximum amortization term for government insured houses from 30 years to 25 years. It also decreased the amount of loan homeowners could borrow. The borrowed amount previously was as much as 85 percent of the value of the home and has now been cut down to 80 percent.
Moreover, those who are planning to buy homes worth more than a million dollars will have to pay 20 percent initially as down payment. The change also set the maximum amount of spending on mortgage, property tax and heating expenses to be 39 percent of the gross household income while 44 percent to be spent on other debt and housing expenses.
These rules will slow down the real estate debt market and discourage buyers from making quick home procuring decisions. Regarding the effect of the rule change, Jim Flaherty said, “It’s a question of trying to moderate behavior and I hope Canadians will reflect before they jump into a market at the high end.” He also added, “It will mean that some people will not buy into the market, it will also mean that some people will buy less into the market, they’ll buy a less expensive home or less expensive condominium.”
CEO of Syndicate Mortgages, Marcus Akran who is an expert on mortgage issues, was of the opinion, “The tightening of the mortgage policy will reduce the debt burden on the economy and lead people to make carefully contemplated home buying decisions. The change in rules will increase the demand for cheaper homes on the market.”
The overall effect of these changes will affect the buying pattern of the Canadian population and alter the trend of the real estate market in Canada. To know more about the current mortgage rates being offered, visit the Syndicate Mortgages website (www.syndicatemortgages.com).