Feds Force Canadians to Lower Debt via Regulatory Changes – Again
The Federal Government has once again acted through regulatory changes to force Canadians to lower their debt levels.
On July 9th, 2012 the mortgage lending rules will be tightened once again in order to gain control of the rising household debt levels in Canada, which marks the third time in five years that the federal government has made changes.
The changes that are being made are as follows:
1. the maximum amortization period has been lowered to 25 years from 30 years;
2. the maximum amount Canadians can borrow when refinancing was lowered from 85% to 80% of the value of their home;
3. the maximum gross debt service ratio is now fixed at 39% and the maximum total debt service ratio at 44%; and
4. government-backed insured mortgages are now limited to homes that have a purchase price of less than $1 million.
Mr. Flaherty and his officials made observations about the market in Canada and noted that the biggest concern that we currently face is with the condominium situation in Toronto, and to a lesser extent in Vancouver, Montreal and Quebec City. He said that “in Toronto in particular, what I’ve observed and heard about is continuous building without restriction because of persistent demand. This concerns me because it is distorting the market”. Based on these observations, the decision was made to change the rules on government-backed mortgages in order to reduce the risk of a United States style housing market crash within Canada.
These changes will limit some people’s ability to purchase a home, particularly first-time homebuyers who will likely have a difficult time coming up with 20% of the mortgage and making higher monthly payments. Overall, it is anticipated by Mr. Flaherty that less than five percent of new home purchasers will be affected by these changes. This is because some of those people who might have been considering purchasing a new home will no longer qualify under the new guidelines that will be introduced on July 9th 2012.
To see the full article refer to the Advocate Daily website by clicking here. You can also access the full article in my July 2012 Newsletter by clicking here.
The content of this blog is intended to provide a general guide to the subject matter. The information does not constitute legal advice and a solicitor and client relationship is not created.
Co-Author Hayley Valleau
Shari D. Elliott & Hayley M. Valleau
Elliott & Elliott
135 Bayfield Street, Suite 101A
Barrie, Ontario, L4M 3B3
Tel.: 705-797-2672
Fax: 705-797-8445
Email: shari@elliottlawyers.com
