Ottawa to Impose New Mortgage Guidelines

OttawaVarious media are reporting that the Finance Department will announce new mortgage qualification rules tomorrow (Tuesday, February 16).

Among the possible rumoured changes:

  • An “income test” to ensure people can make their variable-rate mortgage payments if rates rise (Canadian Press)
  • Higher down payments for “certain borrowers” (Globe)
  • Changes to investment property lending guidelines (CBC)
  • Restrictions on home refinancing (CBC)

Across-the-board down payment increases and a reduction in maximum amortization (from 35 to 30 years) are not part of tomorrow’s changes, according to CBC.

None of the above have been confirmed as of yet.

The government last made wide-ranging mortgage rule modifications in October 2008. (See: Goodbye to 100%/40-year Mortgages)

We’ll have full coverage of any announcements tomorrow. Flaherty has a press conference set for 8:00am ET.

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  1. But… I thought there wasn’t a bubble? (someone was lying??? shocking!)
    Would changes to HELOC/re-financing rules mean that the Smith Manoeuvre dissapears?

  2. The HELOC change is minimal: you can borrow up to 90% of the equity in your home vs. 95%.
    Nothing “announced” today was really worthy of a full press release — a lot of tinkering/tweaking, but no major changes.
    (still 35-year amortizations, still 5% down)
    The biggest news was qualifying buyers based on 5-yr fixed… again, nothing earth-shattering.

  3. Grow a brain Unecessary. We are in a Housing Bubble like it or not. And the lax rules (ie. 0/40 and 5/35) have contributed to it immensely. Denying that fact is craziness. Interest rates are low Yes (and it’s also a huge factor) but if one needed a down payment the interest rates could be zero and it wouldn’t matter. All I can say is good luck to those 0/40 people at renewel time.

  4. VJ, please be careful with your comments. Unfortunately your posting loses its effectiveness when you insult another poster.
    Here is a question to ponder. When a applicant applies for a mortgage and needs to qualify at the 5 year rate, will they have to qualify at the 5 year posted rate of the big banks. If so, certain people may not quite qualify. BUT, will they then be able to qualify at 5 year rates used by smaller non-bank lenders or even ING which doesn’t use the silly posted rates like the big banks.

  5. Adam, your question is a good one.
    In addition, I am interested in knowing when these “changes” will become effective and what about mortgages already approved but not approved.

  6. Nothing much of note in the changes today. Housing market is certainly not in a bubble. Bubbles are things that no one suspects until WAY afterwards. Everyone is saying we’re in a bubble just now, so by definition its just not likely to be the case.

  7. CMHC’s moving, but will Genworth? (For revenue properties)
    I’m also interested to read the rules on ‘speculative’ investments vs ‘income’ properties.

  8. Had one case where two tenants moved out and purchased a home using their credit cards – for them cashing out and making $5,000-$10,000 in about a year or so is big money whereas a RE investor wouldn’t think of trying this. This is what I’m seeing. Looks like a bubble to me.

  9. You couldn’t really have expected much different could you?
    Is there any historical precedent for a politician preemptively pricking a bubble and imposing significant hardship on the population in order to prevent severe hardship later on?
    The safer course is to treat bubble talk as mere theory and let the next guy clean up the mess.
    If the finance minister had returned us to the standards of just a few years ago he would be the most hated man in Canada. What would he have to gain from it?

  10. The fanatics keep screaming “bubble, bubble, bubble!!!” but they offer no evidence of one.
    Their opinions are as useless as someone who says there is no bubble and doesn’t back it up.

  11. According to T.O. Resident, “The HELOC change is minimal: you can borrow up to 90% of the equity in your home vs. 95%.”
    You need to brush up on lending guidelines bud. HELOCs only go up to 80% LTV in Canada.

  12. The fanatics keep screaming “bubble, bubble, bubble!!!” but they offer no evidence of one.”
    I hate the public so much!
    Why wont they insure my real estate investments with their tax dollars?
    Short sighted _____ !!!
    [Edited. Please keep it civil. Thank you. CMT]

  13. The rules their going to impose doesn’t seem all that new. Like what Calgary mortgage brokers have always been promising, lower rates, lower rates and still lower rates, The problem is these rules are not that greatly implemented, and I highly doubt that the new rules will be followed down to the letter. There are still Fort McMurray mortgage brokers that think lightly of the new rules that’s been put to the table. Maybe the McMurray mortgage brokers already see this as another false threat or rather a rule that will be put to the side once all the hype is over.

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