Since the credit crisis, the Department of Finance has been ready to clamp down on mortgage lending. It has handed down:
And now, Finance Minister, Jim Flaherty, has announced the fourth round of mortgage restrictions in four years.
Starting 18 days from now (July 9, 2012), those with less than 20% equity will no longer be able to get a prime mortgage with:
In addition, the government will:
- Limit the maximum gross debt service (GDS) and total debt service (TDS) to 39% and 44% respectively (Currently, GDS does not apply to qualified borrowers with credit scores of 680+), and
- Ban mortgage insurance on properties over $1 million.
These rules are a “judgment call” says Flaherty. They’re meant to “lower risk” for taxpayers and curb excessive household debt, which is Canada’s biggest economic risk. The above initiatives are in addition to pending OSFI mortgage restrictions, which will dampen home-buying demand even further. (OSFI’s final guidelines are expected later today.)
These are significant changes to Canada’s lending landscape. We’ll weigh in on the potential outcomes and implications throughout the day…
Rob McLister, CMT