Canada’s Mortgage Rules 

 

  • Mortgage rules aimed at reining in elevated household household debt and reducing risks born by Canadian taxpayers.
  • The federal government made further modifications to mortgage insurance rules in March and April which will effectively alter the ground rules at the retail market level.
  • The maximum amortization period on government-backed insurance mortgages was reduced to 30 years from 35 years.
  • The maximum refinancing amount that a homeowner can borrow against a government-backed insured mortgage is 85% of the value of the home.
  • The federal government withdrew its insurance backing of lines of credit secured by homes (e.g. home equity of credit or HELOCs.

Implications

Of the latest three changes, the reduction of the maximum amortization period to 30 years has the most direct impact on the Canadian housing market.  The changes to refinancing and HELOCs more directly affected the financing tools available to consumers.  Consumer spending was also be impacted indirectly by the shorter amortization, which caused higher mortgage payments cutting into the remainder of household budgets.  Generally, the shorter admissible amortization period raised the cost of home ownership in Canada.